Two investors in former President Donald Trump’s social media company pleaded guilty Wednesday.
Two investors in former President Donald Trump’s social media company pleaded guilty on Wednesday to insider trading in connection to the recent merger that ultimately took the company public.
Florida venture capitalists Michael Shvartsman and Gerald Shvartsman entered the pleas in a New York court to one count of securities fraud, which can carry a maximum sentence of 20 years in prison, according to prosecutors in a news release.
“Michael and Gerald Shvartsman admitted in court that they received confidential, inside information about an upcoming merger between DWAC and Trump Media and used that information to make profitable, but illegal, open-market trades,” Damian Williams, the U.S. Attorney for the Southern District of New York, said in the release issued Wednesday.
Prosecutors alleged that the pair, who are brothers, made more than $22 million in illegal profits by trading before the announcement that Digital World Acquisition Company (DWAC) was going to merge with the Trump Media & Technology Group, which operates Truth Social. The two companies merged last month, and Trump Media last week started trading on the Nasdaq.
Shares of DWAC, a so-called “blank check” company, spiked after it publicly disclosed it would merge with Trump Media in 2021.
“Insider trading is cheating, plain and simple, and today’s convictions should remind anyone who may be tempted to corrupt the integrity of the stock market that it will earn them a ticket to prison,” said Mr. Williams.
During a court hearing, the two brothers said in court that what they were doing was illegal when they traded information that shouldn’t have been released to the public.
“I’ve made a terrible mistake,” Gerald Shvartsman said, according to media reports.
The Shvartsmans are scheduled to be sentenced on July 17. While securities fraud carries a maximum sentence of 20 years in prison, any sentence would be imposed by the judge based on a range of factors. The average prison sentence in federal fraud cases in the United States last year was around two years.
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