Trump Media is also involved in legal proceedings in Delaware and Florida (file photo)
Two men pleaded guilty on Wednesday to insider trading in securities at the company that ultimately took former U.S. President Donald Trump’s media business public.
Michael Shvartsman, 53, a principal at Miami-based venture capital firm Rocket One Capital, and his brother Gerald Shvartsman, 46 Pleaded guilty to one count of securities fraud before U.S. District Judge Lewis Liman in Manhattan.
Rocket One chief investment officer Bruce Garelick is scheduled to stand trial on related charges on April 29.
Last year, prosecutors charged the trio with illegally trading inside information about Trump Media Technology Group’s (TMTG) plans to go public through a merger with a blank-check company. TMTG operates Trump’s main social media platform, Truth Social.
Prosecutors said the three signed the confidentiality agreement in June 2021, when they were approached to become early investors in the blank-check company Digital World Acquisition. Prosecutors said the agreements required them to keep information they learned confidential and not to trade the company’s securities on the open market.
Prosecutors allege that after hearing that the company was in merger talks with TMTG, the trio tipped others off to buy Digital World securities and then sold those securities after the deal was announced on Oct. 20, 2021, earning a total of $22 million in illegal profits.
Michael and Gerald Schwarzman told the court they knew what they were doing was wrong when they traded on non-public information.
“I made a terrible mistake,” Gerald Schwarzman said during the hearing.
“Insider trading is an act of deception, plain and simple,” U.S. Attorney Damian Williams said in a statement after the guilty plea.
The Shvartsmans are scheduled to be sentenced on July 17. Securities fraud is punishable by up to 20 years in prison, but a judge will base any sentence on a range of factors. The average prison sentence for federal fraud cases in the United States last year was about two years.
TMTG went public in late March, with its shares rising sharply as speculators bet on enthusiasm for Republican presidential candidate Donald Trump in the November election.
Truth Social shares fell off early gains this week as its parent company disclosed a loss of more than $58 million in 2023.
TMTG shares were trading at about $51.60 on Wednesday morning, making Trump’s stake worth about $4 billion, although he is prohibited from selling or borrowing the stake for six months.
Trump Media is also embroiled in legal battles in Delaware and Florida with co-founders Wesley Moss and Andrew Litinsky, who accuse the company of trying to improperly dilute its shares. Trump Media argued they failed to win the shares and sought to strip them of ownership.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
