The former US president has announced plans to start a new social media platform after being banned from Facebook and Twitter last year.
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WASHINGTON — Three Florida men were charged Thursday with insider trading over the shares of a shell company before it announced plans to merge with a social media company launched by former President Donald Trump.
The men, Michael Shvartsman, Gerald Shvartsman and Bruce Garelick, allegedly made more than $22 million in illicit profits from trading in shares of Digital World Acquisition Company.
All three were arrested Thursday morning, the Justice Department said.
The Securities and Exchange Commission has also filed a civil lawsuit against Garelick, who is a board member of DWAC, the Shvartsmans, who are brothers, and Rocket One Capital LLC, a venture capital firm owned by Michael Shvartsman.
The charges do not allege wrongdoing by Trump or any of his family members.
A TMTG spokesperson did not respond to a request for comment on the allegations.
The DOJ announced the charges related to Trump Media’s proposed merger as part of a series of illegal trading allegations. They included accusations that two Pfizer employees exchanged non-public information about trial results for his Covid treatment Paxlovid.
Digital World Acquisition Company. is a special purpose acquisition company, or SPAC, which announced plans to merge with Trump Media & Technology Group in October 2021. The SPAC merger was intended to help TMTG go public without the lengthy IPO process official.
Two investors and one board member
The insider trading complaints allege that Garelick and the Shvartsmans signed investor confidentiality agreements with DWAC in June 2021, after which they were made aware of the proposed merger with Trump Media. At the time, Garelick worked for Rocket One Capital.
The following month, Garelick joined DWAC’s board of directors. As an officer, Garelick had access to even more non-public information than the Shvartsmans. Specifically, he received updates on ongoing talks between DWAC and Trump Media, the government said.
Prosecutors allege Garelick shared this detailed information with his boss, Michael Shvartsman, who then leaked it to his brother, Gerald. Throughout September and October 2021, the three men repeatedly purchased DWAC stock.
On the first day after Trump announced the planned merger, DWAC shares soared 450%. At one point the next day, the stock was worth more than 1,000% of the stock price before the news.
Garelick and the Shvartsmans reportedly sold all of their DWAC shares within the first two days of the merger announcement.
No merger yet
As of Thursday, more than 18 months after the heady days of DWAC’s brief push, the promised merger had yet to happen.
Instead, DWAC has struggled to raise funds from investors amid multiple federal investigations into its practices and funding.
The company first revealed it was under investigation by the Securities and Exchange Commission in a June 2022 filing. A week later, Trump’s media company was subpoenaed by a major jury in the DWAC inquest.
TMTG includes Truth Social, the social media platform Trump launched after Twitter banned him for his tweets on January 6, 2021, when hundreds of his supporters stormed the US Capitol.
DWAC shares closed at $12.66 on Wednesday. The stock has been falling since hitting a closing high of $94 on Oct. 22, 2021, following news of the planned merger with Trump’s media group.