Authorities arrested three Florida men Thursday for illicitly profiting millions of dollars off of insider information about a special-purpose acquisition company’s planned merger with former President Donald Trump’s media company.
Investors at the Truth Social SPAC have been busted by the feds for alleged insider trading.
Federal prosecutors allege Bruce Garelick and brothers Gerald and Michael Shvartzman profited more than $22 million in 2021 by using non-material public information to trade shares of Digital World Acquisition Corp, which announced that fall it intended to acquire Trump Media, the former president’s company encompassing his social media site, Truth Social.
Garelick, who sat on DWAC’s board of directors until resigning last June, allegedly texted Michael Shvartzman he had “intelligence to share” on September 24, 2021, a few weeks before DWAC announced its merger plans with Trump Media (the merger has yet to go through).
The three men, who first invested in DWAC ahead of its initial public offering, bought nearly three million shares or stock options in the firm in the six weeks leading up to the Trump announcement, either personally or via associates, prosecutors allege.
Authorities charged Garelick with six counts of security fraud and one count of conspiracy, carrying up to 130 years of prison time, while the Shvartzman brothers face more than 100-year maximum sentences on similar counts.
DWAC didn’t immediately respond to a request for comment.
Shares of the embattled blank-check company were little changed in Thursday trading. DWAC’s stock surged as much as 1,000% in late 2021 and early 2022 to nearly $100 after its deal with Trump went public, though the stock now trades at below $13, close to its $10 IPO. The stalled merger comes amid a messy stretch for DWAC as it repeatedly failed to meet regulatory requirements. A July 2021 filing with the Securities and Exchange Commission described Garelick as a “venture capitalist/entrepreneur/c-level executive and disruptive technology investing enthusiast” and graduate from the University of Pennsylvania’s business school.
Trump faces 37 federal criminal counts of his own for allegedly violating national security laws by storing sensitive government documents at his private Florida residence.
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