The public listing of former President Donald J. Trump’s social media company took a new hit on Monday when the cash-rich shell company merged with Trump’s company revealed in a regulatory filing that a federal grand jury in New York recently issued subpoenas to the company and its directors.
The grand jury was issued over the past week, according to the filing of the Digital World Acquisition Corporation, a special acquisition company, or SPAC, which announced a merger with the Trump Media & Technology Group in October. Following the merger, Trump Media would take over Digital World̵[ads1]7;s listing and act as a public company.
The revelation of Digital World is the first indication that federal prosecutors in Manhattan have joined the investigation into the merger between Digital World and Trump Media, which has been under investigation by financial regulators for several months. The investigation threatens to further delay the completion of the merger, which will provide Mr. Trump’s company and its social media platform, Truth Social, with up to $ 1.3 billion in capital, in addition to an IPO.
The Securities and Exchange Commission and the Financial Industry Regulatory Authority opened investigations within weeks of the merger announcement. Digital World’s submission on Monday said that the grand jury summons sought information similar to what the SEC had already requested.
The federal grand jury also sought “information about Rocket One Capital.” The submission did not reveal what information the grand jury wanted about Rocket One, a venture capital firm in Miami.
In a separate archive, Digital World revealed that Bruce Garelick had resigned as director. Mr. Garelick is listed in the Digital World Archives as Strategy Manager at Rocket One.
Mr. Garelick did not immediately respond to a request for comment. The submission gave no reason for him to withdraw.
The SEC investigation has focused on whether there were serious discussions between the management of Digital World and Trump Media before SPAC was published in September last year, and why these conversations were not revealed in regulatory records. SPACs, which raise money to go public in the hopes of finding a merger candidate, are not meant to have an acquisition target in mind when raising money from investors.
Regulators also requested information on unusual trading activity in securities in Digital World prior to the merger announcement. There was a large increase in trading in Digital World warrants – a security that gives the holder the right to buy shares at a later date and at a specified price – before the merger announcement.
Trump Media issued a statement in response to Digital World’s revelation that it was “focused on regaining the American people’s right to freedom of expression.” The company added: “We encourage – and will cooperate with – supervisors to support the SEC’s important mission to protect retail investors.”
A grand jury summons is usually issued in connection with a potential criminal investigation. A spokesman for the American lawyer in Manhattan, Damian Williams, refused to comment on the subpoenas from the grand jury of Digital World.
Trump Media’s Truth Social, a Twitter-like clone on social media that Mr. Trump has taken to posting messages on and, after a slow start, has begun to gather followers, especially among conservatives and other supporters of the former president. Mr. Trump was banned from Twitter in January 2021 after repeatedly posting messages claiming that the 2020 presidential election was stolen and not to quickly condemn the January 6 attack on the Capitol building.
Elon Musk, the multi-billionaire entrepreneur who has made an offer to buy Twitter, has said he will allow Mr. Trump to return to the much larger social media platform if he completes the deal. Mr. Trump has said he has no plans to return to Twitter.
But a licensing agreement between Trump Media and the former president allows him to post messages of a political nature on Twitter or other social media platforms.
In regulatory records, Digital World has said that Truth Social “exists to give users real freedom of expression and avoid Big Tech cancellations.”
Mr. Trump is chairman of the board of Trump Media, a title he is expected to retain if the merger is completed. Devin Nunes, a former Republican congressman from California, is the CEO of Trump Media, which recently moved its corporate office to Naples, Florida.
It does not appear that anyone associated with Trump Media has received any subpoenas, according to Digital Worlds records.
It is unclear how Rocket One Capital has been involved in the investigation. The venture capital firm is led by Michael Shvartsman, who did not return requests for comment. Shortly after Digital World revealed the grand jury summons, Rocket One took down much of the public website.
The parallel investigation of federal prosecutors and securities regulators comes as the clock ticks down on the September 8 deadline to complete the merger. The proposed merger agreement allows the deadline for the agreement to be extended to 8 March 2023.
However, shareholders in SPACs have become increasingly reluctant to extend the deadlines for completing mergers as the share prices of many SPACs have cratered in recent months.
Shares of Digital World, which closed last week at $ 27.82, fell more than 10 percent in early trading on Monday. The stock has fallen more than 70 percent from the top in March, but is still well above the $ 10 listing price.
If the merger is not completed, Digital World will have to return the nearly $ 300 million raised in the listing to shareholders. The $ 1 billion that dozens of hedge funds have said they would invest in a completed deal would be canceled.
The poor performance of SPACs has led to a number of planned mergers being canceled by agreement between the parties. The proposed agreement between Trump Media and Digital World allows the parties to agree to terminate the agreement.
Earlier this year, Trump Media raised about $ 15 million in funding from a group of unnamed investors. Kitty Bennett contributed research.