An investor in the shell company that merged with Trump Media was found guilty on Thursday of insider trading linked to that blockbuster deal, according to federal prosecutors.
Bruce Garelick, who served as a director at the shell company, was accused of using secret knowledge of the looming deal with Trump Media to trade and tip off others.
Those trades paid off as shares of the shell company, Digital World Acquisition Corporation (DWAC), spiked in October 2021 on news of the blockbuster deal to bring Truth Social owner Trump Media (DJT) public.
“As a unanimous jury has just found, Garelick blatantly violated the law by using the information that he obtained as an insider at DWAC to trade and tip others,” Damian Williams, the US Attorney for the Southern District of New York, said in a statement. “Garelick’s federal conviction is yet another stark reminder that insider trading is always a losing bet.”
Garelick was among three men who were arrested and charged last June in the insider trading case. The other two, Florida venture capitalist Michael Shvartsman and his brother Gerald Shvartsman, pleaded guilty last month to participating in the insider trading scheme.
Prosecutors have not alleged that former President Donald Trump, the chairman and leading shareholder of Trump Media, had any involvement in the scheme.
Garelick used “valuable material non-public information” about Digital World’s merger plan to “make lucrative trades,” according to the June indictment.
The indictment alleged that Garelick attended board meetings in September and October 2021 about the timing of a merger agreement with Trump Media, which also included discussion of deal terms and a likely closing date. Garelick then allegedly passed that non-public information on to Michael and Gerald Shvartsman, who proceeded to buy Digital World securities.
Beyond their own purchases, prosecutors say Garelick and his co-defendants tipped off friends and colleagues who also bought securities in Digital World before the Trump Media deal was announced publicly.
After years of delay, Trump Media finally completed its merger with Digital World in late March, paving the way for the company to publicly trade on the Nasdaq under the ticker symbol “DJT.”
Even rhough Trump Media generates little revenue and Truth Social remains a tiny player in social media, the company has achieved a massive valuation that experts say makes little sense.
Trump is the dominant shareholder, with a total of 114.75 million shares after he received additional shares through a bonus late last month. At current prices, that stake is worth about $6.2 billion.
This story has been updated with additional developments and context.
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