Months before former President Donald J. Trump’s social media company unveiled a deal to raise hundreds of millions of dollars last fall, word about the deal leaked to a shadowy Miami investment firm, whose executives began plotting ways to make money from the impending deal, according to a report. The British newspaper The Guardian. For people familiar with the discussions.
The deal — under which the so-called Special Purpose Acquisition Corporation, or SPAC, will merge with Mr Trump’s fledgling media business — announced in October. It sent SPAC shares higher.
Employees at Miami-based investment firm Rocket One Capital learned about the pending deal over the summer, long before it was announced, according to three people familiar with the company’s internal discussions. Two people said that Rocket One officials at the time talked about ways to profit from the soon-to-be-announced deal with Trump Media & Technology Group by investing in SPAC, the Digital World Acquisition Corporation.
In the days before the Trump media deal was announced, there was Trading boom In a type of security known as a guarantee, which gives investors the right to buy shares of 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 frantic trading of SPAC orders, according to people familiar with the investigation and public disclosures. Digital World said in a recent regulatory filing that a federal grand jury in Manhattan has issued subpoenas seeking information about Rocket One, among other things.
The exact scope of the federal investigation remains unclear. Authorities have not charged anyone with wrongdoing, and Mr. Garelick’s representatives and others have denied doing anything inappropriate.
Rocket One’s attorney and founder, Michael Schwarzman, has denied having any prior knowledge of the merger between Digital World and Trump Media. He added that “any assertion otherwise is incorrect.”
A lawyer for Patrick Orlando, who runs Digital World, declined to comment, as did representatives of the Securities and Exchange Commission and the US Attorney’s office in Manhattan.
Trump and Trump Media representatives did not respond to requests for comment. The company said in Recent press release That neither Mr. Trump nor Devin Nunes, the former California congressman and CEO of the company, received subpoenas before the grand jury. (The statement identified men only by job titles.)
The investigation into the unusual trading of securities in the digital world is the latest blow to the social media project of Mr. Trump, which has been plagued by technological problems and slow user growth.
Federal authorities are also checking whether Digital World Disclosures About merger talks with Trump Media violate rules governing SPACs. The Securities and Exchange Commission is considering whether to block the merger, according to regulatory filings filed by Digital World. If the deal does not go through, Trump will deprive Medea of $1.3 billion.
There is little public information about Rocket One, which has fewer than 10 employees and has made about 20 early-stage investments over the past decade, according to a review of archived web pages and analysis by PitchBook, a data company. Rocket One took down its website shortly after its name appeared in a Digital World organizational filing.
Two people familiar with Rocket One’s internal discussions said Garelick, a former hedge fund manager in Boston who is now Rocket One’s director of strategy, mentioned the potential deal with Trump Media to some employees last summer. At about that time, a Rocket One employee was asked to perform a financial analysis of the digital world, including warrants, one person said.
Karl Schäuble, a lawyer representing Mr. Garelick, declined to comment. “We expressly reserve any and all rights to assert defamation claims for any article stating that Bruce J. Garelick has committed insider trading or any violation of law,” Mr. Schoeppl said in an email.
Federal prosecutors and securities regulators are trying to determine why traders extracted millions of arrest warrants issued by Digital World days before the October 20 announcement of the merger with Trump Media. Digital World’s stock and warranties rose the next day, with the stock up 350% and the value of the warrants up nearly 1,300%.
Digital World shares closed Monday at $29.51, well off the $97 high set in March, but well above the $10 IPO price.
By merging with Digital World, Trump Media will gain access to approximately $300 million that Digital World raised in its September initial public offering.
Trump Media’s only product is Truth Social, a Twitter-like social media platform. Over the past several weeks, it has become Mr. Trump’s primary means of communicating directly with his supporters. Among other things, he used the Truth Social to blow up the congressional committee investigating the January 6, 2021 attack on the U.S. Capitol. With Mr Trump banned by Twitter, the platform could grow in importance as the former president contemplates another attempt at the White House.
In addition to investigating unusual trade, federal authorities continue to do so Check whether Leaders of Digital World and Trump Media began negotiating a potential merger before Digital World sold shares through an initial public offering in September. At the time of Digital World’s initial public offering, the company said in public filings that it had not yet set a target for the merger. But the New York Times reported earlier that talks between Mr. Orlando and Trump Media officials were already underway.
If Digital World had not disclosed ongoing merger talks with investors, it would have violated SEC rules.
Issuance of subpoenas before a grand jury is usually an indication that prosecutors are conducting a criminal investigation.
Among those who received grand jury subpoenas in late June were Wes Moss and Andy Letinsky (also known as Andy Dean), former contestants of “The Apprentice,” the reality TV show hosted by Mr. Trump, according to people briefed on Subject.
Shortly after Mr. Trump left office, Mr. Moss and Mr. Letinsky pitched the idea of a Trump-branded social media company to the former president. times Previously mentioned They engaged in some early conversations with Mr. Orlando.
Mr. Moss and Mr. Letinsky, who were at one time senior executives of Trump Media, did not respond to requests for comment. Mr. Litinsky is no longer with Trump Media; Mr. Moss’ career status is unclear.
The securities regulators also requested information from Digital World about the role played by the financial advisor to SPAC, the Shanghai-based ARC Group, according to regulatory filings. Federal regulators have previously reprimanded ARC. In 2017, the Securities and Exchange Commission I stopped ARC executives listed shares of three companies, citing “material misstatements” in their stock filings and lack of cooperation of executives.
Ben Proteas Contribute to the preparation of reports. Susan C. Beachy Contribute to research.
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