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The blank-cheque company seeking to take Donald Trump’s media business public said it has agreed to pay $18mn to settle a regulatory probe over certain disclosures surrounding its initial public offering and proposed merger with the former US president’s company.
Digital World Acquisition Corporation said it has reached “an agreement in principle” with the US Securities and Exchange Commission’s division of enforcement in a filing on Monday. The group warned the agreement is subject to SEC approval and only payable if the merger deal with Trump Media & Technology Group goes through.
Under the agreement, DWAC said it would enter into a cease-and-desist order “finding the company violated certain antifraud provisions” in connection with its IPO and a so-called S-4 filing “concerning certain statements, agreements and omissions relating to the timing and discussions the company had with TMTG regarding the proposed business combination”.
The SEC had been investigating whether DWAC broke securities laws by holding talks with TMTG before its listing. Special purpose acquisition companies (Spac) such as DWAC are typically required to disclose to investors if they have had discussions with a target prior to their public market debut.
DWAC became a listed company in September 2021. A few weeks later it announced its merger with TMTG, which operates Trump’s Truth Social media platform. However, a former executive at Trump’s media group filed a whistleblower complaint in which he alleged the Spac had made “fraudulent misrepresentations” about its discussions with the former president’s business which were “substantive” prior to its IPO.
An agreement with the SEC could remove a serious obstacle to getting the DWAC-TMTG deal over the line, but there are now signs of disagreements between the two parties themselves.
DWAC has asked its shareholders to approve a further one-year extension to its September 2023 time limit to complete the transaction, but TMTG has informed the company that it is only bound by the terms of the merger agreement until the current deadline, according to the filing.
The Spac also stated there has been “continued delay in providing various deliverables to the company under the merger agreement required to consummate a business combination” by Trump’s business.
The SEC did not immediately respond to a request for comment.
News of a potential settlement comes days after three men involved with the Spac, including a former board member, were charged with insider trading by the US attorney in Manhattan. The SEC also filed a civil claim against the three businessmen, in which it alleged there are communications between them as early as June 2021 referring to DWAC as “[the] Trump Spac”.
Additional reporting by Stefania Palma in Washington