Two key players in the Trump Media insider trading case have entered guilty pleas in court. Florida-based venture capitalist Michael Shvartsman and his brother, Gerald Shvartsman, confessed on Wednesday to participating in an insider trading scheme connected to the high-profile deal that brought former President Donald Trump’s social media venture into the public sphere.
In New York, both brothers pleaded guilty to one count of securities fraud, which carries a maximum prison sentence of 20 years, as stated by federal prosecutors.
The duo, along with a third individual named Bruce Garelick, were apprehended in June and accused of unlawfully trading on confidential information regarding a shell company’s undisclosed plan to acquire Trump Media & Technology Group, the parent company of the struggling social platform Truth Social.
According to Damian Williams, the US Attorney for the Southern District of New York, “Michael and Gerald Shvartsman acknowledged in court that they received privileged inside information regarding an imminent merger between DWAC and Trump Media, and utilized this information for profitable yet illicit trades on the open market.”
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The indictment asserted that the trio collectively amassed over $22 million in profits in October 2021 by leveraging their insider knowledge of the impending deal. Following the public announcement of the agreement between the blank-check company, Digital World Acquisition Corporation, and Trump Media, shares of the former surged.
Williams emphasized, “Insider trading is dishonest, plain and simple,” adding that “today’s convictions should serve as a stark reminder to anyone contemplating compromising the integrity of the stock market that it will land them in prison.”
After enduring years of legal hurdles and regulatory obstacles, the Trump Media merger ultimately concluded last week, facilitating the public listing of Truth Social’s owner.
Trump Media’s stock price witnessed a significant surge, resulting in substantial financial gains for the former president, who holds the majority of shares. Trump’s stake in Trump Media, comprising 78.8 million shares, is valued at approximately $4.1 billion. Nevertheless, Trump Media’s stock (DJT) experienced a 4% decline on Wednesday.
The frenzy on Wall Street was sparked in October 2021 when Trump unveiled plans to merge his nascent social media venture with Digital World Acquisition Co., a special purpose acquisition company (SPAC).
Prosecutors alleged that the Shvartsman brothers and Garelick, who was a director on Digital World’s board at the time, disclosed information about the impending deal to acquaintances, enabling them to purchase securities in the SPAC prior to the public announcement of the Trump Media deal.
The defendants reportedly shared the confidential information about the forthcoming Trump Media deal with friends during a trip to Las Vegas, with Michael Shvartsman’s neighbors, and with employees at a furniture supply store owned by Gerald Shvartsman.
Despite the sordid affair, the indictment notably kept Trump himself out of the spotlight, leaving the former president unscathed by the scandal.
