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An architect of the plan to take Donald Trump’s media business public has been charged with insider trading after he allegedly shared information about the transaction during a trip to Las Vegas and helped two of his associates make $22.8mn from illicit trades.
Bruce Garelick, who sat on Digital World Acquisition Corporation’s board of directors, was arrested on Thursday along with brothers Michael Shvartsman and Gerald Shvartsman, on criminal charges brought by the US attorney in Manhattan, according to the prosecutor’s office. The Securities and Exchange Commission has also filed a civil claim against the three businessmen.
DWAC briefly became one of the best-performing companies on the stock market after announcing it would merge with Trump Media & Technology Group, which operates the former president’s Truth Social media platform with a mission to “cancel ‘cancel culture’ and stand up to Big Tech”.
Shares in the special purpose acquisition company skyrocketed from about $10 to as high as $175 following the announcement in October 2021. The planned deal with TMTG has since been delayed over pending regulatory investigations.
Garelick and the Shvartsmans bought shares in DWAC months before the Trump deal was announced, and sold them shortly afterwards, making large profits, according to court papers filed on Thursday.
Prosecutors allege that Garelick, who was also chief strategy officer at Rocket One Capital, an investment firm run by Michael Shvartsman, passed on information about how DWAC’s merger with TMTG was progressing to the Shvartsman brothers, and encouraged them to buy warrants that later soared in price.
Grant Smith, a lawyer for the Shvartsmans, declined to comment. A lawyer for Garelick did not immediately respond to a request for comment.
The SEC pointed to text messages and emails from Garelick in which he seemed to contemplate a deal with Trump, months before any such transaction was announced.
In June 2021, Garelick sent an email soliciting investments in what he called “[the] Trump Spac”.
“Wild possibility you might get a kick out of,” Garelick told his daughter later that month. “Your dad might be named to the ‘Trump Media Group’s Board of Directors’.”
In another message, Garelick characterised his potential seat on the DWAC board of directors as “a front row seat babysitting job” that was “well worth it for an unconventional investment like this”.
In an August 2021 filing with the SEC, DWAC told investors that it “[had] not selected any specific business combination target”.
“As a board member, Garelick not only had access to information about DWAC’s upcoming merger announcement, but also a duty to maintain the confidentiality of that information,” said Gurbir Grewal, the SEC’s director of enforcement. “Rather than adhere to his duty as an insider, we allege that Garelick, together with the Shvartsmans, monetised that information to generate over $20mn in illicit profits.”