Two men on Wednesday pleaded guilty to insider trading in the securities of the company that ultimately exposed former President Donald Trump’s media operations.
Michael Shvartzman, 53, head of Miami-based venture capital firm Rocket One Capital, and his brother Gerald Shvartzman, 46, each appeared before U.S. District Judge Louis Lehman in Manhattan. Pleaded guilty to one count of securities fraud.
Bruce Garerick, Rocket One’s chief investment officer, is scheduled to go on trial on related charges on April 29.
Prosecutors indicted the three last year on charges of illegally trading inside information about Trump Media & Technology Group’s plans to go public through a merger with a blank check company.
TMTG operates Truth Social, President Trump’s primary social media platform.
Prosecutors said the three signed non-disclosure agreements in June 2021 when they were approached to become early investors in blank check company Digital World Acquisition.
Prosecutors said the agreement required them to keep the information they learned confidential and not to trade the company’s securities in the public market.
After hearing that the company was negotiating a merger with TMTG, prosecutors said the three people secretly bought Digital World Securities and sold it after the acquisition was announced on October 20, 2021, illegally making a total of $22 million. announced that they had made a profit.
Michael and Gerald Schwarzman said in court that they knew what they were doing was wrong when trading on nonpublic information.
“I made a terrible mistake,” Gerald Schwartzman said at the hearing.
“Insider trading is fraud, plain and simple,” U.S. Attorney Damien Williams said in a statement after the plea.
The Schwartzmans are scheduled to be sentenced on July 17. Securities fraud carries a maximum penalty of 20 years in prison, but any sentence would be imposed by a judge based on a variety of factors.
The average prison sentence in federal fraud cases in the United States last year was about two years.
TMTG went public in late March, and its stock price has soared as speculators bet on enthusiasm for Trump, the Republican presidential candidate for November’s election.
The stock pared gains from earlier this week after Truth Social’s parent company disclosed that it would post a loss of more than $58 million in 2023.
TMTG stock was trading at about $51.60 as of Wednesday morning, making Trump’s holdings worth about $4 billion, but he is prohibited from selling or borrowing for six months. .
Trump Media is also embroiled in legal battles in Delaware and Florida with co-founders Wesley Moss and Andrew Litinsky, who have accused the company of trying to unfairly dilute its stock.
The Trump media claims they didn’t get the stock and is trying to strip them of ownership of the stock.
