Michael Shvartsman, 53, head of the Miami-based venture capital firm Rocket One Capital, along with his brother Gerald Shvartsman, 46, both pleaded guilty to an insider trading scheme surrounding the merger of Trump Media & Technology Group with Digital World Acquisition Corporation (DWAC).
The two admitted to illicitly making more than US$22 million in 2021 by trading on DWAC securities with inside knowledge of the upcoming merger before it became known to the public.
“Michael and Gerald Shvartsman admitted in court that they received confidential, inside information about an upcoming merger between DWAC and Trump Media and used that information to make profitable, but illegal, open-market trades,” said U.S. Attorney Damian Williams.
Prosecutors said that, in exchange for learning of Trump Media’s plans and for the opportunity to become early DWAC investors, the two had to sign non-disclosure agreements and agreed not to trade in DWAC securities on the open market.
As they went against the terms of their agreement, they also continued to remain privy to details on the merger negotiations and the timing of the eventual merger’s public announcement.
The brothers also tipped others about DWAC’s dealings with Trump Media.
They were eventually arrested in June 2023.
“Insider trading is cheating, plain and simple,” Williams said, “and today’s convictions should remind anyone who may be tempted to corrupt the integrity of the stock market that it will earn them a ticket to prison,” the DoJ statement said.
Trump Media’s current market capitalization, that being its market price per common share multiplied by the number of common shares owned by shareholders, stands at roughly $6.27 billion.
As part of their respective plea agreements, Michael and Gerald each admitted to one count of securities fraud, which carries a maximum potential sentence of 20 years in prison. The judge scheduled their sentencing hearing for July 17, 2024.