Trump Media insider trading trial begins in New York

The federal criminal trial of a man accused of insider trading in shares of a shell company before announcing a proposed merger with Trump Media began Tuesday, just blocks from where former President Donald Trump sat during his criminal trial in a case related to a hush money payment.

The first witness in the insider trading case against Bruce Garelick was Andy Litinsky, co-founder of Trump Media. Litinsky himself is embroiled in complex civil litigation against Trump in multiple jurisdictions, over the amount of stock he is owed in Trump’s eponymous social media company.

“It’s a long story,” Litinsky sighed on the stand in U.S. District Court in Manhattan.

Garelick decided to take his chances in front of a jury after his two co-defendants, brothers Michael Shvartsman and Gerald Shvartsman, pleaded guilty April 3 to insider trading charges in the case.

Garelick is accused of sharing material non-public information about front company Digital World Acquisition Corp.’s merger plans. with his boss, Florida venture capitalist Michael Shvartsman and Gerald in 2021.

The three men were accused of buying DWAC shares before the merger announcement based on non-public information, then selling them after the price spiked in the wake of the merger announcement. agreement with Trump in October 2021.

“Now, whatever your opinions about the former president, he is a sensation in the news,” Assistant U.S. Attorney Elizabeth Hanft told the 12-member jury in her opening statement.

Garelick was on the DWAC board in the months leading up to the merger announcement. As such, he was prohibited from sharing material non-public information about the company that could be used by others to purchase shares and exploit a price rise after the information became public.

“What did the defendant do? Exactly what he was not authorized to do,” Hanft said.

The prosecutor said that although Garelick made only about $50,000 in allegedly illicit profits from his DWAC transactions, Michael Schvartsman made $18 million, Gerald Shvartsman made $5 million and others who had been informed as a result of Garelick’s alleged tips had also made money.

Garelick’s attorney, Jonathan Bach, told a starkly different story about his client in his opening statement.

“Bruce Garelick is innocent,” Bach said. “He did not engage in insider trading. He did not commit any crime. Bruce is an honest and ethical man.”

“He never told anyone, or anyone, about what he learned as a DWAC board member,” the attorney said.

Bach said Garelick purchased some shares of DWAC, but stopped acquiring its shares when he began learning information that could affect the stock price if the news became public.

“He followed the rules,” said Bach, who said it was “idiotic” to suggest that Garelick was willing to waste decades of work in the investment industry by engaging in illegal trading for a such modest personal profit.

The defense attorney also sought to draw a distinction between Garelick, who lived and worked remotely in Providence, Rhode Island, in 2021, and Michael Shvartsman, who lived and worked in the Miami area.

Garelick “was in many ways an outsider” in Shvartsman’s business and social circles, Bach said.

“You won’t see any evidence that Bruce tipped anyone. Because he didn’t. Bruce was not a tipper,” Bach said. “You will see evidence that others have tipped.”

Bach also alluded to the nature of Michael Shvartsman’s circles, saying that they were composed of “people who treated each other in very unusual ways.”

Twice during his opening statement, Bach suggested to jurors that their verdict would depend on the question of Garelick’s “state of mind” at the time of the conduct that prosecutors claimed was criminal.

Garelick, Bach asserted, “acted in good faith at all times.”

Assistant U.S. Attorney Matthew Shahabian then called Litinsky to the witness stand.

Litinsky was a contestant on Trump’s NBC reality show “The Apprentice” years before he and his Apprentice “roommate” Wes Moss pitched Trump on the idea of ​​starting a company, Trump Media, that would include an app social media.

In his testimony, Litinsky detailed the events leading up to the merger deal between Trump Media and DWAC.

Shahabian repeatedly asked Litinsky to describe the confidentiality agreements in the letters of intent that Trump Media signed with two potential merger partners, DWAC and Bennesser.e Capital Acquisition Corp. The agreements specifically prohibited the parties from sharing information about the potential transaction without a third party.

“Have you shared information” with strangers? » Shahabian asked Litinsky.

“No, I didn’t,” Litinsky replied. “It’s confidential and it would be against the rules to do so.”

Asked if he traded stocks based on confidential information, Litinsky also replied: “No,” noting: “That would be against the rules.”

The prosecutor’s questions were aimed at emphasizing to jurors the rules Garelick is accused of breaking.

Under questioning by Bach, Litinsky revealed how capricious and demanding Trump could be in the months leading up to the late October 2021 deal to merge Trump Media with DWAC.

Bach seemed to be trying to convey to jurors that any potential deal with Trump was often just that — potential — because the former president had a history of walking away from deals.

Litinsky explained how uncertain this matter could be. “I never got paid at all,” Litinsky said, according to Trump Media. ” testified Litinsky, who was forced out of Trump Media well before the merger was finally completed late last month, leading to Trump Media’s public listing.

“It’s been three and a half years, so they never stopped paying me,” Litinsky told Bach after the lawyer asked whether Trump Media, owner of the Truth Social app, had stopped paying him for his organizational support services. fusion.

Bach also asked Litinsky: “At one point he (Trump) demanded that you transfer all of your shares (in Trump Media) to his wife Melania?

“Yes, something like that happened,” Litinsky replied.

Bach then asked, “And he threatened to blow up the deal if you didn’t make this deal?”

Litinsky was unable to answer that question after a prosecutor objected, and apparently the objection was sustained by Judge Lewis Liman after a side conference with attorneys.

Litinsky testified that in the original deal to co-found Trump Media, he and Moss were supposed to get a 10% stake in the private company, with Trump getting the other 90%.

But “former President Trump made us pay his lawyers” as part of the deal, leaving Moss and Litinsky “a little less, 8.6 percent,” Litinsky testified.

At Trump Media’s current price, that stake would still be worth hundreds of millions of dollars.

But in another court case, Donald Trump claims that Litinsky and Moss do not deserve any of the promised actions.

Litinsky also testified that although Trump Media initially had serious discussions in 2021 about a merger with Bennessere, Donald Trump later turned to talks with DWAC. Both companies were headed by Patrick Orlando.

When Bach asked Litinsky if he had wanted to make the deal with Bennessere, and not DWAC, the witness replied, “I would be completely OK with that.” »

Litinsky also said that while they were exploring a merger with DWAC, Trump was in discussions about partnering with other entities. These included right-wing social media companies Gettr and Parler.

Bach also suggested that Litinsky feared in August 2021, two months before the merger was announced, that his position at Trump Media was under threat.

“You started hearing that Trump’s lawyer in New York and others were starting to blow up your relationship with Trump,” Bach asked Litinsky, who responded: “I would agree with that, but it “is very complex.”

There were conflicts with “the Trump Organization or the Trump family” in the merger negotiations, Litinsky said.

In addition to the internal drama, Litinsky revealed new details about how Trump Media and Technology Group got its name.

He testified that the company was originally called Trump Media Group, or TMG. But it changed its official name to Trump Media & Technology Group shortly before the DWAC merger was announced, after learning that a group of comedians owned the rights to the TMG business name.

“We thought the risk was too great to fight with a group of comedians,” Litinsky deadpanned.