Investor in company that took Trump Media public pleads guilty
Investor in company that took Trump Media public pleads guilty

Investor in company that took Trump Media public pleads guilty to insider trading

NEW YORK (Reuters) – An early investor in the company that took former U.S. President Donald Trump’s media business public pleaded guilty in Manhattan on Wednesday to a federal insider trading charge.

Gerald Shvartsman pleaded guilty at a hearing before U.S. District Judge Lewis Liman.

Prosecutors charged Shvartsman, his brother and a third man last year with illegally trading on inside information about Trump Media & Technology Group’s (TMTG) plan to go public through a merger with a blank-check company. TMTG operates Truth Social, Trump’s main social media platform.

All three men had pleaded not guilty and were scheduled to face trial late this month.

Shvartsman’s brother, Michael Shvartsman, head of Miami-based venture capital firm Rocket One Capital, was scheduled to change his plea at a hearing later on Wednesday.

Rocket One’s chief investment officer, Bruce Garelick, also faces charges.

Prosecutors said the trio signed confidentiality agreements in June 2021 when they were approached to become early investors in Digital World Acquisition, the blank-check company. The agreements required them to keep information they learned confidential and not trade the company’s securities in the open market, prosecutors said.

After hearing the company was in merger talks with TMTG, prosecutors said the trio tipped others and bought Digital World securities, selling them after the deal was announced on Oct. 20, 2021, to make a total of $22 million in illegal profit.

TMTG was publicly listed in late March, and its shares have been on a wild ride fueled by speculators betting on enthusiasm for Trump, the Republican presidential candidate in November’s election.

The stock shed early gains this week as Truth Social’s parent company disclosed it had lost more than $58 million in 2023.

TMTG shares were trading at around $51.60 on Wednesday morning, making Trump’s stake worth about $4 billion, though he is not allowed to sell or borrow against it for six months.

Trump Media is also embroiled in legal battles in Delaware and Florida with co-founders Wesley Moss and Andrew Litinsky, who have accused the company of trying to improperly dilute their stake. Trump Media has argued they failed to earn their shares and seeks to strip them of their ownership.

(Reporting by Jody Godoy in New York; editing by Jonathan Oatis)

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