Shvartsman brothers plead guilty to insider trading on Trump Media merger plans

Two

Florida
brothers
pleaded
guilty
Wednesday
in
New
York
federal
court
to

insider
trading
charges
related
to
their
purchase
and
sale
of
securities
of
the
company
that
eventually
merged
with
former
President

Donald
Trump‘s
social
media
firm.

The
brothers,

Michael
Shvartsman
and
Gerald
Shvartsman,
earned
more
than
$22
million
in
illegal
profits
by
trading
in
securities
of
the
shell
company,
Digital
World
Acquisition
Corp.,
in
October
2021
after
learning
of
nonpublic
information
that
DWAC
planned
a

merger
with
the
privately
held


Trump
Media
&
Technology
Group,
prosecutors
said.

Although
that
merger
was
announced
in
late
October
2021,
it
only
was
completed
last
month
in
a
deal
that
led
to
Trump
Media
becoming
a
publicly
traded
company.

“I’ve
made
a
terrible
mistake,”
Gerald
Shvartsman,
46,
told
Judge
Lewis
Liman
in
Manhattan
federal
court
as
he
pleaded
guilty,
according
to
the
Associated
Press.

He
also
said
that
what
he
had
done
was “wrong
and
the
mistake
I
will
pay
for
dearly
the
rest
of
my
life.”

A
third
defendant
in
the
case,
former
DWAC
board
member
Bruce
Garelick,
has
pleaded
not
guilty
to
securities
fraud
charges
that
allege
he
also
purchased
DWAC
securities
on
the
open
market
after
learning
of
nonpublic
information
about
the
merger
plan.

Garelick,
who
had
also
been
chief
strategy
officer
of
Michael
Shvartsman’s
Miami-based
venture
capital
firm,
Rocket
One
Capital,
is
due
to
stand
trial
in
late
April
in
Manhattan
federal
court.

No
one
associated
with
Trump
Media,
which
owns
the
Truth
Social
app,
has
been
accused
of
wrongdoing
in
the
case.

Michael
Shvartsman,
53,
and
Gerald
Shvartsman,
who
owns
a
furniture
manufacturing
company,
are
scheduled
to
be
sentenced
on
July
17.

Federal
sentencing
guidelines
recommend
that
Michael
Shvartsman,
who
netted
$18.2
million
in
illegal
trading
profits,
receive
between
41
and
51
months
in
prison,
according
to
his
plea
agreement.

Sentencing
guidelines
recommend
that
Gerald
Shvartsman,
who
netted
about
$4.6
million
in
illegal
trading
profits,
receive
a
prison
term
of
between
33
and
41
months.

Liman
is
not
required
to
sentence
the
brothers
according
to
the
guidelines,
which
also
recommend
the
men
each
be
fined
between
$15,000
and
$5
million.

As
part
of
his
plea
agreement,
Michael
Shvartsman
also
agreed
to
forfeit
$18.2
million
to
the
federal
government.
If
he
does
not
pay
that
money,
he
will
forfeit
all
money
in
an
SNB
Bank
account,
as
well
as
any
right
or
title
to
a
$14
million
luxury
yacht
named
Provocateur,
and
its
three
Jet
Skis,
which
were
purchased
with
profits
from
the
trades.

“Insider
trading
is
cheating,
plain
and
simple,
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,”
Manhattan
U.S.
Attorney
Damian
Williams
said
in
a
statement
after
the
brothers
pleaded
guilty.

Alan
Futerfas,
a
lawyer
for
Michael
Shvartsman,
declined
to
comment
on
the
guilty
plea.
A
lawyer
for
Gerald
Shvartsman
did
not
immediately
respond
to
a
request
for
comment.

The
Shvartsmans
in
2021
had
been
invited
to
invest
in
DWAC
and
another
so-called
special
purpose
acquisition
company,
and
after
signing
nondisclosure
agreements
received
information
about
Trump
Media
being
a
potential
target
of
a
merger
plan,
according
to
an
indictment.

Those
agreements
barred
the
brothers
from
using
that
information
to
buy
securities
related
to
the
deal.

“The
defendants
also
tipped
others
about
the
upcoming
merger,
inducing
further
trades
in
DWAC
securities
on
the
basis
of
the
[confidential
information]
they
had
obtained
subject
to
their
non-disclosure
agreement
and
through”
an
associate,
Garelick,
who
had
been
placed
on
DWAC’s
board,
the
Manhattan
U.S.
attorney’s
office
said
in
a
statement.

Trump
Media
mentioned
the
criminal
case
in
a
regulatory
filing
Monday.

“These
individuals
have
no
affiliation
with
TMTG
and
—
on
information
and
belief
—
TMTG
is
not
the
target
of
any DOJ [Department
of
Justice]
enforcement
action,”
the
company
said
in
the
filing
with
the
Securities
and
Exchange
Commission.

Correction:
This
story
has
been
updated
to
correct
the
spelling
of
Digital
World
Acquisition
Corp.