A federal jury in New York on Thursday convicted an investor of insider trading in the shares of a shell company ahead of its October 2021 announcement that it would merge with Trump Media.
The investor, Bruce Garelickwas part of the board of directors of the publicly traded company, Digital World Acquisition Corp.at the time he was accused of sharing and exploiting non-public information with others about his merger plans with the then-private Trump Media, owner of the Truth Social app.
Trump Media’s majority shareholder is the former president donald trumpwho has not been accused of any wrongdoing in the case against Garelick in U.S. District Court in Manhattan.
But Garelick’s trial, which began April 30, took place just blocks from where Trump is on trial in Manhattan Supreme Court on criminal charges related to a secret payment to porn star Stormy Daniels.
Two of Garelick’s co-defendants, brothers Michael and Gerald Shvartsman, pleaded guilty to insider trading charges on April 3.
Jurors in Garelick’s case began deliberating Wednesday afternoon after hearing closing arguments from prosecutors and a defense attorney. After several hours of deliberation Thursday, jurors returned guilty verdicts on the five counts of securities fraud and conspiracy that Garelick, 54, faced.
Garelick, who testified at his trial, is scheduled to be sentenced on September 12.
Garelick was an investment advisor to Michael Shvartsman’s venture capital firm, Rocket One Capital. Prosecutors said Garelick shared material, nonpublic information about DWAC’s Trump Media merger plans with the Shvartsman brothers in 2021 after joining DWAC’s board.
All three men purchased DWAC shares based on this nonpublic information and then sold their shares after the price soared following the announcement of the combination deal with Trump Media, prosecutors said.
Garelick made just $49,000 in profit from the illicit trades, but the Shvartsmans made a staggering $23 million, according to prosecutors.
“Bruce Garelick was part of a sophisticated group of individuals invited to invest in Digital World Acquisition Corporation…, a special purpose acquisition company that raised funds with the intention of later investing in a target company, Trump Media & Technology Group , not yet known to the public,” Manhattan U.S. Attorney Damian Williams said in a statement Thursday.
“When given this opportunity, Garelick promised to keep secret information about DWAC’s interest in acquiring Trump Media and not to use it to trade in the stock market. Garelick also received a seat on the DWAC board, which gave him direct access to additional non-public information about the acquisition,” Williams said.
“As a unanimous jury just found, Garelick blatantly violated the law by using information he obtained as an insider at DWAC to negotiate and tip others,” the lead prosecutor said. “Garelick’s federal conviction is yet another stark reminder that insider trading is always a losing bet.”
DWAC and Trump Media completed their merger in late March. Public trading of the company’s shares under the new ticker DJT began a day later.
Last week, the Security and Exchange Commission accused Trump Media auditor for what the regulator said was “massive fraud” Iinvolving auditor accounting work for hundreds of publicly traded companies, affecting 1,500 SEC filings.
The auditor, BF Borgers CPAand its owner, Benjamin Borgers, agreed to be permanently suspended from practicing accounting before the SEC and to pay a combined total of $14 million in civil penalties.
Trump Media hired a new auditor, Semple, Marchal & Cooper LLP last weekend to replace BF Borgers.
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