Florida Venture Capitalist and Associates Plead Not Guilty to Insider Trading Charges
Three individuals, including a Florida venture capitalist, his brother, and an employee, pleaded not guilty in a New York court on Thursday to charges of insider trading. Michael and Gerald Shvartsman, along with Bruce Garelick, were accused last month of engaging in illegal trading activities involving Digital World Acquisition Corp (DWAC.O), a special purpose acquisition company. The alleged insider trading occurred before the company’s proposed merger with former U.S. President Donald Trump’s social media company, Trump Media & Technology Group.
The trial for the case has been scheduled for March 18, 2024, by U.S. District Judge Lewis Liman. It is important to note that neither Trump nor his company, which operates the Truth Social app, have been accused of any wrongdoing in relation to this case.
According to court documents, Michael Shvartsman, who led Rocket One Capital, a small Miami-based venture capital firm, employed Garelick as the chief investment officer. All trading activities involving Digital World securities were conducted through this firm. Gerald Shvartsman, on the other hand, runs a furniture store.
Authorities allege that Garelick, who also served as a director at Digital World, provided the Shvartsmans with insider information regarding the merger talks. Subsequently, the defendants allegedly purchased Digital World securities and shared tips with others. The illegal activities resulted in substantial profits when Digital World’s share price more than quadrupled after the merger announcement on October 20, 2021. In a related civil lawsuit, the U.S. Securities and Exchange Commission claimed that the illegal trades led to profits of approximately $18.3 million for Michael Shvartsman, $4.6 million for Gerald Shvartsman, and $50,000 for Garelick.
The proposed merger between Digital World and Trump Media remains uncertain. If the merger is completed, Trump Media would gain access to over $1 billion in cash from Digital World’s institutional investors, including hedge funds. Trump currently controls 90% of Trump Media, according to a services agreement dated February 2, 2021.
Shareholders of Digital World approved an extension of the merger deadline to September 2023. A vote is scheduled for August to decide whether to further extend the deadline to September 2024. The cases against the defendants are being heard in the U.S. District Court for the Southern District of New York, with case numbers 23-00307 and 23-05567 for the criminal and civil lawsuits, respectively.
Reporting by Jody Godoy and Jonathan Stempel in New York; Editing by Richard Chang
Our Standards: The Thomson Reuters Trust Principles.
Original Story at www.reuters.com – 2023-07-20 23:48:00