Two brothers pleaded guilty in federal court Wednesday for their roles in a $22 million insider trading scheme tied to the company that former President Trump's social media company took public.
Florida venture capitalist Michael Schwartzman, 53, and his brother Gerald, 46, each pleaded guilty to one count of securities fraud, which carries a maximum penalty of 20 years in prison. US District Judge Louis Lehman set the brothers' sentencing hearing for July 17.
The brothers are accused of illegally trading on non-public information in October 2021, as Digital World Acquisition Corp. (DWAC), a shell company, to acquire Trump Media & Technology Group, the parent company of the social media network Truth Social.
According to the Department of Justice, the brothers obtained confidential information about the details of the deal, including the timeline for its announcement, and then purchased millions of dollars' worth of DWAC securities on the open market before announcing the merger with Trump Media.
“Michael and Gerald Schwarzman admitted in court that they obtained confidential inside information about an upcoming merger between DWAC and Trump Media and used that information to conduct lucrative, but illegal, trades on the open market,” U.S. Attorney Damian Williams said in a press release. Wednesday from the Ministry of Justice.
“Insider trading is fraud, plain and simple, and today's convictions should remind anyone who might be tempted to subvert the integrity of the stock market that doing so will earn them a ticket to prison,” Williams added.
The Shvartsman family was arrested last June, along with a third person, Bruce Garelick, who worked at Michael Shvartsman's investment firm Rocket One Capital. Garelick, who was appointed to the DWAC board, is accused of providing the brothers with important information about the deal expected in 2021. Garelick is scheduled to stand trial at the end of this month.
Michael Shvartsman's attorney declined to comment. Lawyers for Gerald Schwarzman and Bruce Garelick did not immediately respond to requests for comment.
Updated at 5:08 p.m.
Copyright 2024 Nexstar Media Inc. all rights are save. This material may not be published, broadcast, rewritten or redistributed.
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”