Insider Trading Scandal Involving Trump Media Business
Two men have pleaded guilty to insider trading in securities related to the company that took former U.S. President Donald Trump’s media business public. Michael Shvartsman and Gerald Shvartsman admitted to securities fraud before U.S. District Judge Lewis Liman in Manhattan.
Background
Rocket One’s chief investment officer, Bruce Garelick, is set to face trial on related charges on April 29. The trio, including Garelick, were charged with illegally trading on inside information about Trump Media & Technology Group’s plan to go public through a merger with a blank-check company.
Illegal Trading Activity
- The trio signed confidentiality agreements in June 2021 when approached to become early investors in Digital World Acquisition, the blank-check company.
- They were required to keep information confidential and not trade the company’s securities in the open market.
- After learning about the merger talks with TMTG, the trio tipped others and bought Digital World securities, making $22 million in illegal profit.
Legal Consequences
Michael and Gerald Shvartsman acknowledged their wrongdoing in court. U.S. Attorney Damian Williams emphasized that insider trading is considered cheating and is a serious offense.
The Shvartsmans are awaiting sentencing on July 17. Securities fraud carries a maximum sentence of 20 years in prison, with the actual sentence determined by the judge based on various factors.
Trump Media Business Updates
Trump Media & Technology Group went public in late March, with its shares experiencing volatility driven by speculators. The company reported a significant loss in 2023, leading to fluctuations in its stock price.
As of the latest trading day, TMTG shares closed at $48.81, valuing Trump’s stake at approximately $3.8 billion. However, restrictions prevent Trump from selling or leveraging his shares for six months.
Legal Disputes
Trump Media is currently facing legal challenges in Delaware and Florida from co-founders Wesley Moss and Andrew Litinsky. The co-founders allege that the company is attempting to dilute their ownership stake improperly. In response, Trump Media contends that Moss and Litinsky have not fulfilled their obligations to earn their shares and seeks to revoke their ownership rights.
