Two brothers pleaded guilty in federal court Wednesday to their roles in a $22 million insider trading scheme connected to a company that took former President Trump’s social media company public.
Florida venture capitalist Michael Schwartsman, 53, and his brother Gerald, 46, each pleaded guilty to one count of securities fraud and were sentenced to up to 20 years in prison. U.S. District Judge Lewis Lehman set a sentencing hearing for the brothers for July 17.
The brothers revealed in October 2021 that a shell company, Digital World Acquisition Corporation (DWAC), was planning to acquire Trump Media & Technology Group, the parent company of social media network Truth Social. He is accused of illegally trading information.
According to the Justice Department, the brothers obtained confidential information about transaction details, including announcement schedules, and purchased millions of dollars worth of DWAC securities on the open market before the Trump Media merger was made public.
“Michael and Gerald Schwartsman admitted in court that they received confidential inside information about the upcoming merger of DWAC and Trump Media and used that information to conduct lucrative but illegal open market transactions. ” U.S. Attorney Damian Williams said in a press release. from the Department of Justice on Wednesday.
“Insider trading is fraud, plain and simple, and today’s conviction is a reminder to those who seek to undermine the health of the stock market that it can earn them a ticket to prison. “I think they should,” Williams added.
The Schwartzmans were arrested last June along with a third person, Bruce Garelick, who worked for Michael Schwartzman’s venture firm Rocket One Capital. Garelick, who was appointed to DWAC’s board of directors, is accused of providing his brother with material information about a transaction planned for 2021. Mr. Garelick is scheduled to go on trial later this month.
The Hill has reached out to attorneys for the three defendants.
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