On Wednesday, two men pleaded guilty to insider trading in securities for the company that eventually went public with former US President Donald Trump’s media business. Michael Shvartsman, 53, the founder of Miami-based venture capital company Rocket One Capital, and his brother Gerald Shvartsman, 46, both pleaded guilty to one count of securities fraud before U.S. District Judge Lewis Liman in Manhattan. Bruce Garelick, Rocket One’s chief investment officer, is slated to stand trial on similar allegations on April 29.
Prosecutors charged the trio last year with illegally trading on inside knowledge about Trump Media & Technology Group’s
Prosecutors charged the trio last year with illegally trading on inside knowledge about Trump Media & Technology Group’s (TMTG) intention to go public through a merger with a blank-check company. TMTG runs Truth Social, Trump’s primary social media company. Prosecutors claim the trio signed confidentiality agreements in June 2021 when invited to become early investors in Digital World Acquisition, the blank-check company. Prosecutors claimed the agreements required them to keep the information they obtained confidential and not trade the company’s securities on the open market.
After learning that the business was in merger talks with TMTG, prosecutors claimed the trio alerted others and purchased Digital World securities, then sold them when the agreement was announced on Oct. 20, 2021, for a total of $22 million in illegal profit.
“I’ve made a terrible mistake,” Gerald Shvartsman said at the hearing. “Insider trading is cheating, plain and simple,” U.S. Attorney Damian Williams said in a statement after Michael and Gerald Shvartsman admitted in court that they were aware that trading on nonpublic information was unlawful.
The Shvartsmans are set to be sentenced on July 17. Securities fraud carries a maximum punishment of 20 years in jail, although the judge determines any sentence based on a variety of circumstances. The average prison term in federal fraud cases in the United States last year was about two years.