Major Investors In Trump Media Plead Guilty To Insider Trading, Face 20 Years In Prison

Venture capitalist Michael Shvartsman and his brother, Gerald Shvartsman, have pleaded guilty to an insider trading scheme connected to the high-profile public listing of Donald Trump’s social media enterprise Truth Social.

In a New York court, each brother pleaded guilty to one count of securities fraud, which carries a maximum prison sentence of 20 years, as stated by federal prosecutors.

The arrests of the Shvartsman brothers took place in June after allegations surfaced of illicit trading based on nonpublic information about a shell company’s confidential plan to acquire Trump Media & Technology Group, the parent company of the social network Truth Social. 

Damian Williams, the U.S. Attorney for the Southern District of New York, stated, “Michael and Gerald Shvartsman admitted in court that they received confidential, inside information about an upcoming merger between DWAC and Trump Media and used that information to make profitable, but illegal, open-market trades.”

“Insider trading is cheating, plain and simple,” emphasized Williams. “Today’s convictions should remind anyone who may be tempted to corrupt the integrity of the stock market that it will earn them a ticket to prison.”

According to the indictment, the brothers and a third individual, Bruce Garelick, profited over $22 million in October 2021 when they used their insider knowledge of the deal as leverage. The stock of Digital World Acquisition Corporation, the shell company involved, experienced a significant surge after the public announcement that it agreed to merge with Trump Media.

After years of legal and regulatory hurdles, the Trump Media merger was finally completed last week. Trump Media’s share price soared and generated substantial financial gains for the former president, who holds the majority stake. With 78.8 million shares valued at approximately $4.1 billion, Trump has reaped significant benefits from the surge in Trump Media’s (DJT) stock, which experienced a 4% decline on Wednesday.

Prosecutors asserted that the Shvartsman brothers and Garelick, a former director on Digital World’s board, tipped off acquaintances and colleagues about the future deal, which granted them the opportunity to acquire securities in the SPAC before the public announcement of the Trump Media merger. The defendants shared confidential information about the coming Trump Media deal while on a trip to Las Vegas with Michael Shvartsman’s neighbors and among Gerald Shvartsman’s employees at a furniture supply store.

Last week, Trump’s stake dropped $1 billion in one day due to the avalanche of bad news about the company.