Regulators Investigate Trump’s Shell Deal

Trump made $ 1.7 billion, according to a new book 1:12

(CNN) – The shell company that is facilitating the return of former President Donald Trump to Wall Street revealed Monday that federal regulators are investigating the deal.

In October, Trump announced a new media company that would “resist the tyranny of big technology.” That new entity, chaired by the former president, agreed to go public through a merger with Digital World, a Special Purpose Acquisition Company, or SPAC for its acronym in English.

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In a filing, Digital World Acquisition Corp. said it received a document and a request for information from the Securities and Exchange Commission (SEC) in early November. Among other items, Digital World said the SEC’s request sought documents and communications between Digital World and Trump Media and Technology Group.

Digital World also said that Wall Street’s self-regulator, the Financial Industry Regulatory Authority, or FINRA, is investigating the trade ahead of the announcement of the deal.

Shares of Digital World soared as much as 1657% in the days after the deal was announced. The company achieved meme stock status almost overnight, although little is known about the company. The submissions did not indicate how much revenue the company generates, if any.

But almost immediately the deal came under scrutiny. Trump began discussing a merger with Digital World long before the blank check company went public and before such talks were revealed to investors, The New York Times reported in late October.

Criticism of Trump’s shell company

Sen. Elizabeth Warren asked the SEC to investigate whether Digital World broke any laws because the company repeatedly told shareholders that it had not had substantive discussions with a target company. SPACs are not supposed to have planned merger goals before raising money from the public.

Digital World said Monday that the SEC’s request sought documents related to its board of directors meetings, trade-related policies and procedures, the identification of bank, phone and email addresses and the identities of certain investors.

Digital World indicated that it cooperated and emphasized, citing the SEC’s request, that the investigation does not mean that the SEC has “concluded that someone violated the law or that the SEC has a negative opinion of DWAC or of any person, event or security.” .

Neither Digital World nor Trump Media and Technology Group responded to requests for additional comment.

Shares of Digital World fell 5% on Monday.

Are there problems with the merger of the company?

In addition to the SEC’s investigation, Digital World said that in late October and early November it received a request for information from FINRA. The company said FINRA’s request referred to a trade review ahead of Trump’s merger announcement on Oct. 20.

“In accordance with FINRA’s request, the investigation should not be construed as an indication that FINRA has determined that violations of Nasdaq rules or federal securities laws have occurred, nor as a reflection of the merits of the securities involved. or anyone who has transacted in such securities, “Digital World said in the presentation.

Despite regulatory scrutiny and the fact that Trump Media & Technology Group has not actually launched a product, the company announced Saturday that it has reached a deal to raise $ 1 billion by completing its SPAC deal.

Interestingly, TMTG did not disclose who are the investors pledging $ 1 billion, other than saying they are a “diverse group” of institutional investors.

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