This photo illustration shows an image of former President Donald Trump next to a phone screen displaying the Truth Social app on February 21, 2022 in Washington, DC.
Stefani Reynolds | AFP | Getty Images
Investment firms led by the former CEO of the SPAC that merged with Donald Trump’s media company claim their files were hacked and stolen by a current board member of the media company.
In a federal civil lawsuit filed last month in South Florida, the companies accuse board member Eric Swider of plotting a coup in early 2023 to remove Patrick Orlando as CEO of special purpose acquisition company Digital World Acquisition Corp. to replace.
As part of this attempted overthrow, Swider and others allegedly “stole access” to the companies’ computer systems and then “used the stolen information to attack Orlando,” the lawsuit says.
It was “an audacious plan to take control of their holdings and increase them,” says the lawsuit, filed by Benessere Investment Group and ARC Global Investments II.
The lawsuit seeks damages and an injunction “prohibiting the use of the stolen information and preventing defendants from hacking into the company’s records.”
Orlando was fired by Digital World in March 2023 and replaced by Swider.
This blank-check company completed a merger last month Trump Media & Technology Group Corp. made publicly available, allowing trading on the Nasdaq stock exchange. The company, which owns the Trump-centric social media app Truth Social and operates under the ticker symbol DJT, surged in its stock market debut, but those gains have since disappeared.
On Wednesday alone, the share price fell almost 9%. Since April 1, the stock has lost almost 45% of its value.
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The Florida lawsuit is just one in a series of messy and dramatic legal battles that have marked Trump Media’s rocky road to an IPO and its equally tumultuous first weeks as a publicly traded company.
DWAC settled fraud charges with the Securities and Exchange Commission in July, although the agency found that the SPAC had filed “materially false and misleading” filings.
Trump Media sued its co-founders in late March over alleged mismanagement of the merger and sought to ban them from owning the company’s stock.
These co-founders have sued Trump Media in Delaware Chancery Court over their involvement in the company.
Critics, meanwhile, are calling the company a meme stock and a “scam.” They point to the company’s reported net loss of $58.2 million on revenue of just $4.1 million in 2023.
Trump Media did not immediately respond to CNBC’s request for comment on the lawsuit. Emails to addresses belonging to Swider and co-defendant Alexander Cano, the former president of DWAC, did not immediately receive replies.
In an interview with Wired, which first reported the lawsuit on Wednesday, Swider denied all of the allegations against him.
“I just think he never let go [of] the fact that I replaced him,” Swider told the outlet. “I don’t know why it offends him so much.”
The alleged hack
The Florida lawsuit, filed shortly before the merger in late March, shows that Orlando was successful in its efforts to bring DWAC into a merger agreement with Trump Media.
It is alleged that Swider misled DWAC’s directors and business partners by publishing “false and misleading representations of events” at the company.
He is also said to have “offered excessive compensation to the other directors he had hired to work with him in return for supporting his coup.”
Swider wanted to massively increase his compensation by becoming CEO of DWAC — but he also wanted to take control of ARC II, which owned about 19% of DWAC before the merger, according to the lawsuit.
Trump Media reported in an April 1 regulatory filing that ARC II owns 6.9%, or about 9.5 million shares, of the post-merger company.
Information about ARC II was stored in an account on a Benessere electronic file storage website, the lawsuit says.
To access the account containing “the lifeblood” of both investment firms, Swider allegedly recruited Cano, Orlando’s former assistant. The companies accuse Swider of promising to name Cano president of DWAC in exchange for access to the account.
A woman uses her phone in front of screens displaying trading information about Truth Social and Trump Media & Technology Group stocks outside the Nasdaq Market premises in New York City, the United States, March 26, 2024.
Brendan Mcdermid | Reuters
Cano agreed, and Swider “made good on his promise” by simultaneously presenting Cano with a convertible note worth 165,000 DWAC shares – an award worth more than $6 million at the time, the lawsuit says.
Swider said in the Wired interview that Orlando voted for Cano’s award, adding that he never hired Cano as his assistant, as the lawsuit alleges.
The lawsuit states that since February 2023, Cano repeatedly accessed the storage account and “immediately” disclosed the information contained therein to Swider.
Swider then used it to email “false and defamatory statements” about Orlando to ARC II members, the lawsuit says.
In a March 5 email — included in the lawsuit as “Exhibit A” — Swider accused Orlando of “failing to maintain a fiduciary responsibility to ARC II,” among a number of other claims.
“Patrick threatened me with pending litigation because of comments I made to fellow members, so I want to make that clear. I am not disparaging Patrick,” Swider wrote in the email.
“I am sure he is an amazing person, honest, hardworking. He cares about your well-being. He looks good. He is cool. I like him. Nothing in this email is intended to be defamatory. “He was great” as a leader. Patrick – you’re amazing!!”
Orlando later discovered the email because Swider “failed to remove Orlando’s wife from the mailing list,” the lawsuit says.
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2024-04-10 21:25:08
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