Trump’s Truth Social merger partner violated securities laws, SEC says

The top financial partner of former President Donald Trump’s media company violated anti-fraud regulations and misled investors about his original plans to publicly disclose the owner of Trump’s Truth Social website, the Securities and Exchange Commission said Thursday.

Digital World Acquisition — the special acquisitions company, or SPAC, that had planned to merge with Trump’s company — agreed to pay $18 million if the merger closes and to audit the false filings to comply with securities laws, SEC officials said in a statement.

While that penalty would limit a lengthy investigation, the SPAC’s proposed merger with Trump Media & Technology Group remains stalled. The blank check company could be forced into liquidation if the merger is not completed by a Sept. 8 deadline, returning to investors roughly $300 million that Trump’s company has long hoped to unlock.

When Digital World announced its IPO in September 2021, the company told investors that its executives had not engaged in any merger discussions with any companies, in line with federal SPAC rules.

But Digital World’s then-head, Miami financier Patrick Orlando, had actually discussed a merger with Trump Media seven months earlier, and the company worked through the summer to set the deal in motion, the SEC said, citing text messages and other exchanges.

The announcement confirms what has long been rumored about the proposed merger and backs up claims by Will Wilkerson, a Trump Media executive who told the SEC in a whistleblower last year that the company had violated securities laws. Wilkerson was fired after speaking to The Washington Post.

Digital World “failed to disclose its discussions with TMTG and failed to disclose a material conflict of interest for its CEO and chairman,” said Gurbir S. Grewal, the director of the SEC’s Division of Enforcement. “These disclosure failures are particularly problematic because investors focus on factors such as the SPAC’s management team and potential merger targets when making financial decisions.”

Digital World said in an SEC filing earlier this month that the settlement would “remove the cloud of uncertainty” over the company and allow it to move forward with the merger. But it also cited an email in which Trump Media said it “believes it is currently only bound under the merger agreement through September 8, 2023,” an indication that Trump Media may consider exiting the deal.

Digital World said in its statement that it “remains very interested in the transaction with [Trump Media] and is hopeful [the companies] can resolve this interpretation [sic] divergence.” Trump Media officials have not responded to requests for comment since the filing.

Digital World’s share price has plunged to $13, down from a high of $175. Trump and his Republican allies have long accused the SEC of political bias in stopping the merger.

Digital World’s $18 million penalty must be paid within 14 days of the merger, if it is ultimately closed, the SEC said in an order. Officials also said Digital World could waive the penalty if it dissolves and returns cash to shareholders before Jan. 1, 2025.

Federal prosecutors in New York last month charged a former Digital World board member and two other men with making $22 million in illegal profits as part of an insider trading scheme before the Trump Media merger proposal was publicly announced.

Truth Social, a Twitter-like site launched after Trump was banned from Twitter in the wake of the January 6, 2021 riot at the US Capitol, has become Trump’s main online megaphone. Although he is by far the biggest draw, with more than 5 million followers, the social network has otherwise struggled to gain attention or relevance online.

Trump Media told investors in 2021 that the social network would reach 56 million users by 2024. The site gets about 600,000 visits per month, according to estimates from web analytics firm Similarweb.

In a financial disclosure this month covering much of his post-presidency, Trump said the company had earned a relatively paltry $1.2 million in advertising. The filing also said Trump Media’s value — which it had estimated at the end of 2021 could rise to $1.7 billion — was now no more than $25 million.

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