Two defendants in Trump Media insider trading case signal possible guilty pleas

A
Florida
venture
capitalist
and
his
brother
moved
Monday
toward
potential
guilty
pleas
in
an

insider
trading
case
connected
to
the

merger
that
took

Donald
Trump‘s

social
media
company
public
last
week.

Michael
Shvartsman,
the
venture
capitalist,
and
his
brother,
Gerald
Shvartsman,
both
previously
pleaded
not
guilty
to

criminal
charges
of
insider
trading
and
conspiracy,
related
to
trading

shares
in
of
the

shell
company
that
merged
with


Trump
Media
last
week.

A
new
court
filing
Monday
revealed
that
a
change
of
plea
hearing
for
the
brothers
will
be
held
Wednesday
afternoon
in
U.S.
District
Court
in
Manhattan.
A
change
of
plea
hearing
typically
involves
a
defendant
pleading
guilty.

Also
Monday,
New
York
defense
attorney
Alan
Futerfas
filed
a
notice
with
the
court
that
he
had
joined
Michael
Shvartsman’s
legal
team.

Futerfas
has
represented
Donald
Trump
in
the
past,
as
well
as
Trump’s
adult
children
and
his
company,
the
Trump
Organization,
in
various
legal
matters.

In
a
brief
phone
call
with
CNBC
on
Monday,
Futerfas
said
he
could
not
talk
about
the
case
and
whether
Shvartsman
would
plead
guilty,
nor
why
he
had
been
hired
to
represent
him.

Earlier
this
year,
the
Florida-based
venture
capital
investor
was
charged
with
money
laundering
in
the
case
on
top
of
the
securities
fraud
counts
he
already
faced.

Trump
Media
and
Technology
Group
mentioned
the
case
in
a
securities
filing
on
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
newly
public
company
told
regulators.

An
attorney
for
Gerald
Shvartman,
Roland
Riopelle,
also
declined
to
comment
on
his
client,
who
owns
a
furniture
manufacturing
company
in
Florida.

A
spokesman
for
the
U.S.
Attorney’s
Office
in
Manhattan,
which
is
prosecuting
the
Shvartsmans
and
a
third
man,
Bruce
Garelick,
did
not
immediately
respond
to
a
request
for
comment.

Like
the
brothers,
Garelick
has
pleaded
not
guilty.
As
of
late
Monday,
there
was
no
change
of
plea
hearing
for
him
scheduled
on
the
docket.

All
three
men
are
scheduled
to
go
on
trial
April
29.
If
the
Shvartsmans
plead
guilty
but
Garelick
does
not
change
his
plea,
he
would
still
be
expected
to
stand
trial
on
that
date.

CNBC
has
reached
out
to
Garelick’s
lawyer
for
comment.

Futerfas’
surprise
appearance
in
the
case
and
the
newly
scheduled
plea
hearing
came
a
week
after
Judge
Lewis
Liman
denied
Michael
Shvartsman’s
request
to
move
his
trial
on
the
money
laundering
counts
to
a
federal
court
in
South
Florida
from
one
in
Manhattan.

The
filings
also
came
six
days
after
Trump
Media’s
shares
began
trading
on
the
Nasdaq
Stock
Market
under
the
DJT
ticker,
after
completing
a
merger
with
the
special
purpose
acquisition
company,
Digital
World
Acquisition
Corp.

The
Shvartsmans
and
Garelick
were
indicted
last
June
on
securities
fraud
and
conspiracy
charges.

They
are
accused
of
buying
up
DWAC
stock
based
on
nonpublic
information
that
the
shell
company
was
considering
a
possible
merger
with
Trump’s
social
media
company,
Trump
Media
and
Technology
Group,
which
owns
the
Truth
Social
app.

Michael
Shvartsman
is
CEO
of
Rocket
One
Capital
LLC
in
Miami,
and
Garelick
is
a
former
chief
strategy
officer
at
the
firm.

In
2021,
Garelick
was
working
for
Shvartsman
while
also
serving
on
the
board
of
DWAC,
then
a
little
known
shell
company.
When
Garelick
learned
about
the
negotiations
between
DWAC
and
Trump
Media
to
merge,
prosecutors
allege
that
he
shared
that
information
with
Shvartsman,
who
in
turn
shared
it
with
his
brother,
Gerald.

Over
the
next
several
months,
the
three
men
repeatedly
bought
stock
in
DWAC.

When
DWAC
announced
that
it
planned
to
merge
with
Trump
Media
in
October,
the
company’s
stock
soared
from
around
$10
a
share
to
close
at
$94
a
share
on
Oct.
24,
2021.

On
the
heels
of
the
merger
announcement,
Garelick
and
the
Shvartsmans
allegedly
sold
their
newly
valuable
shares
for
a
net
profit
of
$22
million,
according
to
prosecutors.

In
February
of
this
year,
Michael
Shvartsman
was
charged
in
a
superseding
indictment
that
added
a
money
laundering
count
to
the
original
charges
against
him
and
the
other
two
men.

The
new
count
and
a
count
of
engaging
in
a
monetary
transaction
in
property
derived
from
specified
unlawful
activity
to
the
charges
he
already
faced
with
the
two
other
men.

It
also
added
a
count
related
to
two
money
transfers
Shvartsman
allegedly
made
with
his
share
of
the
DWAC
stock
sale
profits.

In
December
2021,
he
allegedly
transferred
about
$8.4
million
from
the
securities
sales
to
a
bank
account
controlled
by
a
business
associate.
The
move “provided
an
effective
method
of
concealing
the
source
and
ownership
of
those
fundings,”
according
to
prosecutors.

The
following
summer,
Shvartsman
allegedly
moved
another
$12
million
to
a
bank
account
he
controlled,
according
to
the
indictment,
which
noted
that
he
put
that
money
toward
the
purchase
of
a
$14.7
million
luxury
yacht.

Shvartsman
also
allegedly
took
steps
to
hide
the
source
of
the
money.
They
included
using “corporate
forms,
multiple
bank
transfers,
and
legal
agreements,
to
conceal
the
source
of
the
funds
used
to
purchase
the
yacht,
as
well
as
the
ownership
and
control
of
the
yacht
once
acquired,”
the
indictment
says.

Prosecutors
are
seeking
the
forfeiture
of
a
bank
account,
the
yacht
and
three
Yamaha
Jet
Skis
that
were
tendered
to
the
vessel.