Three South Florida investors charged with insider trading linked to Trump Media merger
Three South Florida men were arrested Thursday on charges of illegally making millions of dollars through insider trading before the public announcement of a Miami-based company’s merger with a media firm owned by former President Donald Trump that was planning to go public.
The indictment, returned by a federal grand jury in Manhattan, did not implicate the former president.
The Miami-based company, Digital World Acquisition Corp., went public in September 2021 before acquiring Trump Media & Technology Group the following month, leading to the creation of the former president’s social media platform, Truth Social.
The three men charged with securities fraud are Michael Shvartsman, 52, of Sunny Isles Beach; Gerald Shvartsman, 45, of Aventura;, and Bruce Garelick, 53, of Fort Lauderdale, who was given a seat on DWAC’s board of directors and had access to confidential information, according to the indictment. All three appeared Thursday in Miami federal court.
In an agreement with federal prosecutors, the Shvartsman brothers were granted personal surety bonds of $20 million and $5 million, respectively, along with special conditions, including a ban on speaking with witnesses about the case. Magistrate Judge Edwin Torres allowed the brothers, both Canadian citizens, to be released late Thursday and transferred to Manhattan for a future arraignment.
Their South Florida attorneys, Robert Buschel and Grant Smith, said they look forward to defending their clients but declined to comment about the allegations.
Bruce Garelick, who worked for the brothers’ venture capital company, was granted a $100,000 personal surety bond. His defense attorney, Michael Hursey, said after the hearing that his client’s bail reflected his minor role in the alleged securities fraud case.
“From the government’s point of view, his role was minimal,” Hursey told the Miami Herald. “We have an explanation we can give,” declining to elaborate further.
The three defendants are accused of making $22 million from insider trading on DWAC securities by buying shares of the company’s stock on the open market before news of its merger with Trump Media & Technology Group was made public. After the public announcement, the men dumped their securities to pocket their profits, the indictment says.
“Insider trading is not easy money,” U.S. Attorney Damian Williams said in a news release. “It’s cheating. It’s a bad bet. Because my office, the Southern District of New York, is watching. And we’re working quickly to investigate and prosecute anyone who corrupts our financial markets. And we’ll keep at it as long as it takes. You can bet on that.”
The financing behind the DWAC-Trump merger is complex.
According to the indictment, the three men were invited to invest in the special purpose acquisition company, Digital World Acquisition Corp., and were provided confidential information that a potential target of DWAC and another Miami-based acquisition company, Benessere Capital Acquisition Corp., was Trump Media & Technology Group. Typically, a special purpose acquisition company, or SPAC, is formed with the intent to merge with a private company before it becomes publicly traded — in this instance, Trump Media, which owns Truth Social.
According to the indictment, Garelick was given a seat on DWAC’s board of directors and had access to confidential information. It said he then shared that information with his co-conspirators, the Shvartsman brothers, who operated a venture capital firm, Rocket One Capital LLC. Garelick worked for their firm.
The indictment said that between June and November 2021, the men purchased DWAC securities including warrants of their own and shared insider secrets with their friends and employees, who also bought tens of thousands of units of securities ahead of the merger announcement with Trump Media & Technology Group.
Ultimately, DWAC — instead of Benessere — formed a merger with Trump Media in the fall of 2021.
The Securities and Exchange Commission has not yet signed off on that deal, while federal prosecutors and FBI agents pursue their probe of the merger and related matters involving the financing arrangement behind the social media platform. The former president — who has separately been charged in a federal classified documents case in South Florida and a state hush-money case in New York City — regularly uses Truth Social to defend himself and attack political foes.
Last year, the Miami Herald and other news media, including the Washington Post and New York Times, reported on the ongoing investigation. In an exclusive interview with the Herald, a Trump Media executive-turned-whistle-blower detailed internal problems with the merger and the conservative social media platform.
William Wilkerson, a senior vice president of operations at Sarasota-based Trump Media, filed a whistle-blower complaint last August with the SEC, alleging securities violations involving its merger with DWAC.
Wilkerson, represented by lawyers Phil Brewster and Patrick Mincey, was subsequently fired in October and later found work as a barista at a Starbucks, according to the Washington Post.
Information from the Associated Press contributed this story.
This story was originally published June 29, 2023 at 1:16 PM.
