Florida venture capitalist Michael Shvartsman and his brother Gerald Shvartsman pleaded guilty to participating in an insider trading scheme tied to the deal that brought former President Donald Trump’s social media company public. The brothers pleaded guilty to one count of securities fraud, carrying a maximum sentence of 20 years in prison. They were arrested in June and charged with trading on nonpublic information about a shell company’s plan to buy Trump Media & Technology Group, the parent company of Truth Social.
The brothers admitted to receiving confidential information about the merger between DWAC and Trump Media and using that information for profitable but illegal trades. Along with a third individual, Bruce Garelick, they made over $22 million by trading on their inside knowledge of the deal. Shares of Digital World Acquisition Corporation surged after the announcement of the merger with Trump Media. US Attorney Damian Williams emphasized that insider trading is cheating and warned of prison for anyone attempting to manipulate the stock market.
Following legal delays, the Trump Media merger finally closed, allowing Truth Social to go public. The company’s share price rose, benefiting Trump as the dominant shareholder. Trump owns a stake valued at around $4.1 billion in Trump Media. The frenzy on Wall Street began when Trump announced plans to merge his social media business with Digital World Acquisition Co., a special purpose acquisition company. The Shvartsman brothers and Garelick shared information about the deal with friends and colleagues, enabling them to buy securities before the merger became public.
The defendants passed the secret information about the impending deal to various individuals, including friends on a trip to Las Vegas, Michael Shvartsman’s neighbors, and Gerald Shvartsman’s employees at a furniture store. There was no indication that Trump was involved in the insider trading scheme. The story has been updated with additional developments and context. CNN’s Kara Scannell contributed to the report.
In conclusion, Michael and Gerald Shvartsman pleaded guilty to securities fraud in connection with insider trading related to the Trump Media merger. The brothers, along with a third individual, profited from illegal trades based on nonpublic information. The successful completion of the Trump Media merger led to a surge in the company’s stock price, benefiting Trump as the main shareholder. The Shvartsman brothers and Garelick disclosed information about the deal to friends and colleagues, facilitating early investment in the SPAC before the merger was publicly announced. Despite the allegations, there was no suggestion of Trump’s involvement in the insider trading scheme.