Early investor in Trump Media business pleads guilty to insider trading charge

Donald Trump

3rd April 2024 – (Washington) Gerald Shvartsman, an early investor in the company that recently took former U.S. President Donald Trump’s media business public, pleaded guilty on Wednesday to a federal charge of insider trading in Manhattan.

Shvartsman entered his guilty plea during a hearing before U.S. District Judge Lewis Liman.

Last year, prosecutors charged Shvartsman, along with his brother and another individual, with engaging in illegal insider trading based on confidential information regarding Trump Media & Technology Group’s (TMTG) plan to go public through a merger with a blank-check company. TMTG is the entity behind Truth Social, Trump’s primary social media platform.

Initially, all three individuals had pleaded not guilty and were scheduled to face trial later this month.

Michael Shvartsman, Gerald’s brother and the head of Miami-based venture capital firm Rocket One Capital, was slated to change his plea during a subsequent hearing on Wednesday. Bruce Garelick, the chief investment officer of Rocket One, also faces charges in connection with this case.

According to prosecutors, the three defendants signed confidentiality agreements in June 2021 when they were approached to be early investors in Digital World Acquisition, the blank-check company involved in the merger. These agreements obligated them to maintain the confidentiality of the information they received and refrain from trading the company’s securities on the open market.

Prosecutors allege that after learning about the merger discussions between Digital World Acquisition and TMTG, the defendants tipped off others and purchased Digital World securities. They subsequently sold these securities after the merger was announced on October 20, 2021, yielding a total illegal profit of $22 million.

TMTG went public in late March, and its stock has experienced significant volatility due to speculation fueled by enthusiasm for Trump, who was the Republican presidential candidate in the last election.

This week, the stock saw early gains dissipate as Truth Social’s parent company disclosed a loss of over $58 million in 2023.

As of Wednesday morning, TMTG shares were trading at approximately $51.60, making Trump’s stake worth about $4 billion. However, Trump is currently restricted from selling or leveraging his stake for a period of six months.

In addition to the legal challenges related to insider trading, Trump Media is also embroiled in legal disputes with co-founders Wesley Moss and Andrew Litinsky in Delaware and Florida. Moss and Litinsky have accused the company of attempting to improperly dilute their ownership stake. Trump Media, on the other hand, contends that the co-founders failed to fulfil their obligations and seeks to strip them of their shares.