NEW YORK, USA — A scandalous wave has crashed upon the Wall Street shores as federal prosecutors arrested three investors on Thursday, June 29, 2023, on insider trading charges that allegedly netted them over $22 million.
The scheme involved clandestine knowledge about a deal to take former President Donald Trump’s media business public.
Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick are accused of capitalizing on nonpublic information regarding Digital World Acquisition Corporation’s covert plan to acquire Truth Social owner Trump Media & Technology Group in October 2021.
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Garelick, a former member of Digital World’s board of directors, allegedly played a crucial role by providing his co-conspirators with insider “intelligence” about the merger.
“Rather than adhere to his duty as an insider, we allege that Garelick, together with the Shvartsmans, monetized that information to generate over $20 million in illicit profits,” stated Gurbir Grewal, director of the SEC’s division of enforcement.
Mr Grewal emphasized the SEC’s unwavering resolve to expose insider trading, including in SPAC mergers.
According to the indictment, the trio made their fortunes by purchasing Digital World securities based on confidential information and tipping off friends and colleagues, who also took the plunge. As the deal went public and the value of the securities soared, the defendants and their accomplices cashed in.
What’s more, the indictment details that the confidential information made its rounds through an eclectic network: Michael Shvartsman’s neighbors, friends on a Las Vegas jaunt, and Gerald Shvartsman’s employees at a furniture supply store.
These contacts collected tens of thousands of securities ahead of the announcement.
The Securities and Exchange Commission (SEC) has filed civil insider trading charges against the three investors, who surrendered to authorities and were expected to appear in a Miami federal court.
While Donald Trump has not been implicated in the insider trading, the charges cast a shadow over the already controversial Trump Media deal.
Legal experts have been scrutinizing the transaction and regulatory eyebrows continue to be raised.
Adding to the drama, the merger, announced nearly two years ago, still hasn’t materialized. Nasdaq recently threatened to delist Digital World due to non-compliance with filing requirements.
The fallout of this high-profile insider trading case remains to be seen, but it certainly brings attention once again to the complex intersections of finance, politics, and media in an ever-evolving landscape.
Trump Media did not respond to a request for comment.
