Three Digital World Acquisition investors face charges for their involvement in an insider-trading scheme that federal prosecutors say netted them $22 million off the special-acquisition company’s plan to take former President Trump’s social-media company public. Former Digital World board member Bruce Garelick and investors Michael Shvartsman and Gerald Shvartsman were arrested Thursday morning and charged with several counts of securities fraud. The three defendants used confidential information they gained as investors in Digital World to buy millions of dollars of securities ahead of the announcement of the planned merger with Trump’s Truth Social, according to an indictment unsealed Thursday, the Wall Street Journal reports. Garelick also worked at venture-capital firm Rocket One Capital, and shared information with his boss, Michael Shvartsman, according to the Securities and Exchange Commission, which filed a separate civil lawsuit. The SEC said Michael Shvartsman then shared information with his brother, Gerald.
The three men are also accused of tipping off friends and employees about the coming announcement. When Digital World announced the merger in 2021, the defendants’ stock and warrant holdings increased in value. Garelick resigned from Digital World’s board in June 2022 days before the company announced that its board members had been issued grand-jury subpoenas. The case was one of four insider trading cases announced Thursday by federal prosecutors in Manhattan. In one case, a Pfizer employee was charged with insider trading based on nonpublic results of a clinical trial of Paxlovid, a COVID-19 drug. In another, former Spartan Capital Securities broker Jordan Meadow was charged with using confidential information about planned mergers and acquisitions that he obtained from a friend to make millions of dollars in profits. The friend secretly accessed confidential work documents on a laptop belonging to his then-girlfriend, an executive assistant at Morgan Stanley. “Insider-trading is not a quick buck,” Manhattan U.S. Attorney Damian Williams said. “It’s not easy money. It’s not a sure thing. It’s cheating.”