Trump Media merger partner DWAC settles with SEC over fraud
Former U.S. President and Republican presidential candidate Donald Trump speaks at a campaign event in Council Bluffs, Iowa, July 7, 2023.
WASHINGTON — The Securities and Exchange Commission announced Thursday that it had settled fraud charges with Digital World Acquisition Corp ., the company that is seeking to take former President Donald Trump's social media venture public.
As part of the settlement, DWAC was ordered to pay an $18 million civil penalty fee in the event that it executes a final merger and takes Trump Media and Technology Group public.
If the merger is not completed in time to meet a Jan. 1, 2025, deadline, however, and if DWAC returns investors' money, the SEC said it would agree to forgo the penalty.
The announcement came less than a month after the U.S. financial regulator charged three Florida men with insider trading of DWAC stock before it announced plans to merge with Trump's company, which operates the Truth Social platform.
Shares of DWAC rose 30% in extended trading following the SEC announcement.
The fraud charges stem in part from what the SEC says were DWAC's "extensive SPAC merger discussions" with Trump's media company several months before filing paperwork to go public in Sept. 2021.
In those filings, DWAC falsely stated that "neither DWAC nor its officers and directors had had any discussions with any potential target companies prior to the IPO," the SEC found.
SPACs, or special purpose acquisition companies, are prohibited from soliciting specific merger targets before they file an initial public offering.
The SEC also found that DWAC's former CEO, Patrick Orlando, failed to disclose conflicts of interest related to a separate deal he made with TMTG.
The settlement with DWAC is the latest in a growing list of legal problems that have ensnared Trump and his businesses since he left the White House in 2021.
The former president is currently facing state charges in New York that his company falsified business records. He was also indicted in federal court last month for allegedly mishandling classified documents. Trump has pleaded not guilty in both cases.
Authorities in Georgia are also investigating Trump, the frontrunner for the 2024 Republican nomination, over his attempts to overturn his loss in the 2020 presidential election.
Source: CNBC
