Trump’s social media deal under grand jury scrutiny

The public listing of former President Donald J. Trump’s social media company took a further hit Monday when the cash-rich shell company that merged with Mr. Trump’s company revealed in a regulatory filing that a federal grand jury in New York recently issued subpoenas for the company and its directors.

Grand jury subpoenas were issued last week, according to a filing by Digital World Acquisition Corporation, a special purpose acquisition company, or SPAC, which announced a merger with Trump Media & Technology Group in October. Following the merger, Trump Media would take over the listing and trading of Digital World as a public company.

The Digital World disclosure is the first sign that federal prosecutors in Manhattan have added to the scrutiny of the Digital World-Trump Media merger, which has been under investigation by financial regulators for months. The investigation threatens to further delay the completion of the merger, which would provide Trump’s company with up to $1.3 billion in capital, in addition to going public.

The Securities and Exchange Commission and the Financial Industry Regulatory Authority opened investigations within weeks of the merger announcement. Digital World’s filing on Monday said the grand jury subpoenas sought information similar to what the SEC had already requested.

The federal grand jury also sought “information about Rocket One Capital.” The filing did not reveal what information the grand jury wanted about Rocket One, which is a Miami venture capital firm.

In a separate filing, Digital World revealed that Bruce Garelick had stepped down as director. Mr. Garelick is listed in Digital World filings as Chief Strategy Officer on Rocket One.

Garelick did not immediately respond to a request for comment. The presentation did not give a reason for his resignation.

The SEC investigation has focused on whether there were serious discussions between Digital World leadership and Trump Media before SPAC went public last September and those discussions were not disclosed in regulatory filings. SPACs, which raise money to go public in hopes of finding a merger candidate, are not supposed to have an acquisition goal in mind when they raise money from investors.

Regulators also requested information about unusual trading activity in Digital World securities prior to the merger announcement. There was a big 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 disclosure saying it was “focused on reclaiming the right of the American people to free expression.” The company added: “We encourage, and will cooperate with, oversight that supports the SEC’s important mission of protecting retail investors.”

Trump Media’s flagship product is Truth Social, a Twitter-like social media clone on which Trump has begun posting messages and, after a slow start, has begun to garner a following, especially among conservatives and other supporters of the former president. . Trump was banned from using Twitter in January 2021 after repeatedly posting messages claiming the 2020 presidential election had been stolen and for failing to promptly denounce the Jan. 6 attack on the Capitol building.

Shares of Digital World, which closed last week at $27.82, fell more than 10 percent in premarket trading. The stock is down more than 70 percent from its March high but remains well above its trading price.

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