Two plead guilty to insider trading linked to Trump Media merger: Report

Two individuals have pleaded guilty to insider trading charges related to the merger that took former US President Donald Trump's media business public on Wednesday.

Michael Shvartsman, head of Miami-based venture capital firm Rocket One Capital, and his brother Gerald Shvartsman each admitted to one count of securities fraud before US District Judge Lewis Liman in Manhattan.

The case involves allegations of illicit trading based on confidential information regarding Trump Media & Technology Group's (TMTG) plan to go public through a merger with a blank-check company.

The charges come from accusations that the trio, including Rocket One's chief investment officer Bruce Garelick, illegally traded on insider information concerning the merger plans between TMTG and Digital World Acquisition, a blank-check company.

Prosecutors have asserted that after learning about the merger talks, the defendants shared this information and engaged in trading Digital World securities, ultimately profiting $22 million from the deal.

During the court hearing, both Michael and Gerald Shvartsman expressed remorse for their actions.

US Attorney Damian Williams condemned insider trading, describing it as "cheating, plain and simple".

The sentencing for the Shvartsmans is scheduled for July 17, with securities fraud carrying a maximum prison sentence of 20 years.

However, the actual sentence imposed will depend on various factors, with the average prison term in federal fraud cases around two years.

Meanwhile, Garelick is set to face trial on related charges on April 29.

Following the public listing of TMTG in late March, its shares have experienced significant instability, fuelled partly by speculation surrounding Trump's involvement.

However, recent disclosures regarding Truth Social's parent company's financial performance have dampened investor enthusiasm.

TMTG reported a loss of over $58 million in 2023, contributing to a decline in its stock value.

Although challenges persist, TMTG shares closed at $48.81 on Wednesday, valuing Trump's stake at approximately $3.8 billion.

However, Trump is subject to restrictions preventing him from selling or leveraging his stake for six months.

Additionally, Trump Media is entangled in legal disputes with co-founders Wesley Moss and Andrew Litinsky, who have accused the company of attempting to dilute their stake improperly.

Trump Media, in turn, holds that Moss and Litinsky failed to earn their shares and seeks to revoke their ownership.

(With inputs from Reuters)