The Schvartsman brothers, both from Florida, each pleaded guilty to one count of securities fraud, which carry a maximum sentence of 20 years in prison, and sentencing is set for July 17.
After being invited to invest in Digital World Acquisition Corp, they signed non-disclosure agreements and learned confidential information about the merger between Digital World and Trump Media—and then bought “millions of dollars” of Digital World securities ahead of a public announcement of the merger.
Michael Shvartsman was the head of Rocket One Capital, and prosecutors say he also placed an associate on Digital World’s board of directors after investing in the company, who allegedly provided Michael and Gerald Shvartsman with non-public information on the merger.
Previous indictments have identified that board member as Bruce Garelick, also of Rocket One Capital, who is facing related charges but has not pleaded guilty and has a court date set for April 29.
I’ve made a terrible mistake,” Gerald Shvartsman reportedly said in court Wednesday.
“Insider trading is cheating, plain and simple,” U.S. Attorney Damian Williams said. “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.”
Investors in Digital World Acquisition Corp.—which was a type of publicly traded shell corporation called a special-purpose acquisition company, or SPAC—approved a long-planned merger with Trump Media earlier this month, allowing Trump’s social media platform Truth Social to go public and giving Trump a majority stake in the new company. The merger was expected to net Trump more than $3 billion—and was seen at the time as a potential boost to the former president amid his ongoing legal battles. The merger was held up after the SEC accused Digital World of making “material misrepresentations” in its disclosures to investors by failing to disclose that it had formulated a plan to acquire Trump Media before filing its initial public offering—which is typically not allowed for SPACs. Digital World paid an $18 million settlement to resolve those charges.
