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Two Florida brothers pleaded guilty Wednesday in federal court in New York to insider trading charges related to the buying and selling of securities in the company that eventually merged with former President Donald Trump’s social media company.
Brothers Michael Shvartsman and Gerald Shvartsman made over $22 million in illicit profits in October 2021 by trading securities of the shell company Digital World Acquisition Corp. after learning from nonpublic information that DWAC was considering a merger with the private company planned Trump Media & Technology Groupprosecutors said.
Although this merger was announced in late October 2021, it was only completed last month in a deal that resulted in Trump Media becoming a publicly traded company.
“I made a terrible mistake,” Gerald Shvartsman, 46, told Judge Lewis Liman in Manhattan federal court as he pleaded guilty, according to the Associated Press.
He also said that what he did “was wrong and that I will pay for that mistake dearly for the rest of my life.”
A third defendant in the case, former DWAC board member Bruce Garelick, has pleaded not guilty to securities fraud charges, claiming he also purchased DWAC securities on the open market after learning nonpublic information about the merger plan .
Garelick, who was also chief strategy officer of Michael Shvartsman’s Miami-based venture capital firm Rocket One Capital, is due to appear in federal court in Manhattan at the end of April.
No one associated with Trump Media, which owns the Truth Social app, has been accused of wrongdoing in the case.
Michael Shvartsman, 53, and Gerald Shvartsman, owner of a furniture manufacturing company, are scheduled to be sentenced July 17.
Federal sentencing guidelines recommend that Michael Shvartsman, who made $18.2 million in illegal trading profits, face a prison sentence of between 41 and 51 months, according to his plea agreement.
Sentencing guidelines recommend that Gerald Shvartsman, who made about $4.6 million in illegal trading profits, receive a prison sentence of between 33 and 41 months.
Liman is not required to sentence the brothers under the guidelines, which also recommend that each of the men be fined between $15,000 and $5 million.
As part of his plea agreement, Michael Shvartsman also agreed to forfeit $18.2 million to the federal government. If he fails to pay this money, he will lose all the money in an SNB bank account as well as any right or interest in a $14 million luxury yacht called Provocateur and its three jet skis, which were purchased with the trading profits.
“Insider trading is fraud, pure and simple, and today’s convictions should serve as a reminder to anyone who might be tempted to damage the integrity of the stock market that doing so will earn them a prison sentence,” Manhattan U.S. Attorney Damian Williams said. In a statement after the verdict, brothers pleaded guilty.
Alan Futerfas, an attorney for Michael Shvartsman, declined to comment on the guilty plea. A lawyer for Gerald Shvartsman did not immediately respond to a request for comment.
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The Shvartsmans were invited to invest in DWAC and another so-called special purpose acquisition company in 2021 and, after signing nondisclosure agreements, received information that Trump Media was a potential target of a merger plan, an indictment says.
These agreements prohibited the brothers from using this information to purchase securities in connection with the business.
“Defendants also gave others notice of the impending merger and initiated additional transactions in DWAC securities based on that information [confidential information] “They had obtained this information subject to their confidentiality agreement and through an employee, Garelick, who had been appointed to the DWAC board,” the U.S. Attorney’s Office in Manhattan said in a statement.
Trump Media mentioned the criminal case in a regulatory filing on Monday.
“These individuals have no connection to TMTG and – based on information and belief – TMTG is not the target of a DOJ.” [Department of Justice] “Take enforcement action,” the company said in the filing with the Securities and Exchange Commission.
Correction: This story has been updated to reflect the spelling of Digital World Acquisition Corp. to correct.
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2024-04-04 00:16:23
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