It is said that Trump’s media agreement has been leaked several months in advance

It is said that Trump’s media agreement has been leaked several months in advance

Months before former President Donald J. Trump’s social media company unveiled a deal to raise hundreds of millions of dollars last fall, leaked news of the deal to an obscure investment company in Miami, whose executives began planning ways to monetize the impending transaction. according to people who are familiar with the discussions.

The agreement – where a so-called special acquisition company, or SPAC, was to merge with Trump’s new media business – was announced in October. It sent shares in SPAC soaring.

Employees at Miami’s investment company, Rocket One Capital, had learned of the pending deal over the summer, long before it was announced, according to three people familiar with the company’s internal discussions. Two of the people said that Rocket One officials at the time were talking about ways to profit from the soon-to-be-announced deal with the Trump Media & Technology Group by investing in SPAC, the Digital World Acquisition Corporation.

In the days before the Trump Media deal went public, there was an increase in trading in a type of security known as warrants, which gave investors the right to buy shares in Digital World at a predetermined price in the future.

Federal prosecutors and regulators are now investigating the merger between Digital World and Trump Media, including the insane trade in SPAC’s warrants, according to people familiar with the investigation and public revelations. Digital World said in a recent regulatory filing that a federal grand jury in Manhattan had issued subpoenas to seek information about Rocket One, among other things.

The exact scope of the federal investigations remains unclear. Authorities have not blamed anyone for the mistake, and representatives of Mr. Garelick and others have denied any wrongdoing.

A lawyer for Rocket One and its founder, Michael Shvartsman, denied that they had any prior knowledge of the merger between Digital World and Trump Media. He added that “any claim otherwise is untrue.”

A lawyer for Patrick Orlando, who runs Digital World, declined to comment, as did representatives from the Securities and Exchange Commission and the US law firm in Manhattan.

Representatives of Mr. Trump and Trump Media did not respond to requests for comment. The company said in a recent press release that neither Mr. Trump nor Devin Nunes, the former California congressman who is the company’s CEO, received subpoenas from the grand jury. (The release identified the men only by their job titles.)

The investigation into unusual trading in securities from Digital World is the latest blow to Mr. Trump’s social media venture, which has struggled with technological problems and slow user growth.

Federal authorities are also investigating whether Digital World’s revelations about the merger negotiations with Trump Media violated SPAC rules. And the Securities and Exchange Commission is considering whether to block the merger, according to regulatory records from Digital World. If the deal does not go through, it will deprive Trump Media of $ 1.3 billion.

There is little public information about Rocket One, which has fewer than 10 employees and has made around 20 early investments over the past decade, according to a review of archived websites and an analysis by PitchBook, a computer company. Rocket One deactivated its website shortly after the name appeared in a Digital World regulatory archive.

Two of the people familiar with Rocket One’s internal discussions said that Mr. Garelick, a former Boston hedge fund manager who is now Rocket One’s chief executive, mentioned the possible deal with Trump Media to some employees last summer. Around that time, a Rocket One employee was asked to conduct a financial analysis of Digital World, including warrants, one of the people said.

Carl Schoeppl, a lawyer representing Mr. Garelick, declined to comment. “We expressly reserve the right to claim defamation for any article that says, suggests and / or otherwise suggests that Bruce J. Garelick committed insider trading or any violation of the law,” Schoeppl said in an email.

Federal prosecutors and securities regulators are trying to find out why traders snatched up millions of warrants issued by Digital World days before the Oct. 20 announcement of the merger with Trump Media. Shares and subscription rights in Digital World rose the next day, with the share rising 350 percent and the warrants rising almost 1300 percent.

The Digital World stock closed at $ 29.51 on Monday, well outside the stock’s highest level of $ 97 in March, but well above the $ 10 IPO.

By merging with Digital World, Trump Media would gain access to around $ 300 million that Digital World had raised in its listing in September. The companies secured commitments from other investors to kick in an additional $ 1 billion if the merger is completed.

Trump Media’s only product is Truth Social, a Twitter-like social media platform. In recent weeks, it has become the most important means for Mr. Trump to communicate directly with his supporters. Among other things, he has used Truth Social to blow up the congressional committee investigating the January 6, 2021 attack on the American capital. With Mr. Trump banned from Twitter, the platform could grow in importance as the former president considers a new White House bid.

In addition to the investigation into the unusual trade, federal authorities continue to investigate whether the leaders of Digital World and Trump Media began negotiating a potential merger before Digital World sold shares through a listing in September. At the time of Digital World’s first public offering, the company said in public registrations that it had not yet identified a merger target. But The New York Times has previously reported that talks between Mr. Orlando and Trump Media officials were already underway.

If Digital World did not disclose ongoing merger talks to investors, it would have violated SEC rules.

The issuance of grand jury summonses is usually an indication that the prosecuting authority is conducting a criminal investigation.

Among those who received subpoenas from the grand jury at the end of June were Wes Moss and Andy Litinsky (also known as Andy Dean), two former participants in “The Apprentice”, the reality TV show hosted by Mr. Trump, according to people who were informed about the case.

Shortly after Mr. Trump left office, Mr. Moss and Mr. Litinsky presented the idea of ​​a Trump-branded social media company to the former president. The Times has previously reported that they were involved in some of the early talks with Mr. Orlando.

Mr. Moss and Mr. Litinsky, who were once top executives at Trump Media, did not respond to requests for comment. Mr. Litinsky no longer works for Trump Media; Mr Moss’s job status is unclear.

Securities regulators have also requested information from Digital World about the role played by SPAC’s financial adviser, Shanghai-based ARC Group, according to regulatory records. Federal regulators have previously reprimanded the ARC. In 2017, SEC ARC executives stopped listing shares in three companies, citing “material misstatement” in their securities submissions and lack of cooperation from executives.

Ben Protess contributed with reporting. Susan C. Beachy contributed research.

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