- Florida venture capitalist Michael Shvartsman and his brother Gerald Shvartsman pleaded guilty to participating in an insider trading scheme linked to the deal that brought Donald Trump’s social media business public.
- They pleaded guilty to one count of securities fraud each, which carries a maximum sentence of 20 years in prison.
- The brothers were accused of making over $22 million in October 2021 by trading on inside knowledge of the deal between Trump Media & Technology Group and Digital World Acquisition Corporation.
Former President Donald Trump‘s social media company, Trump Media & Technology Group, made headlines last year when it announced plans to go public via a merger with Digital World Acquisition Corp. Now, two investors have pleaded guilty to insider trading in connection with that deal.
Background on the Trump Media Deal
In October 2021, Trump announced that his new social media startup, Trump Media & Technology Group, parent company of the platform Truth Social, would go public through a merger with Digital World Acquisition Corp., a special purpose acquisition company (SPAC).
The deal valued Trump Media at $875 million. When it was announced, shares of Digital World Acquisition Corp. spiked, as investors looked to get in early on the Trump business.
Insider Trading Charges
On Wednesday, brothers Michael Shvartsman and Gerald Shvartsman pleaded guilty in New York to one count each of securities fraud related to insider trading.
According to prosecutors, the brothers traded on confidential information about the impending merger between the two companies prior to it being announced.
The Shvartsman brothers made over $22 million in profits by trading early based on this inside knowledge, along with a third individual, Bruce Garelick.
“Michael and Gerald Shvartsman admitted in court that they received confidential, inside information about an upcoming merger between DWAC and Trump Media and used that information to make profitable, but illegal, open-market trades,” said Damian Williams, U.S. Attorney for the Southern District of New York.
Securities fraud carries a maximum sentence of 20 years in prison.
The Aftermath
After years of delays, the merger between Trump Media and Digital World Acquisition finally closed last week.
Trump Media’s stock price has surged since going public, greatly benefiting Trump, who owns a controlling stake.
While Trump himself was not implicated in the insider trading scheme, the guilty pleas serve as a warning to those who would take advantage of nonpublic information.
“Insider trading is cheating, plain and simple,” said Williams, “and today’s convictions should remind anyone who may be tempted to corrupt the integrity of the stock market that it will earn them a ticket to prison.”
