Two siblings from Florida have pleaded guilty to charges of insider trading, confessing to making more than $22 million unlawfully before the public announcement in 2021 that a firm was taking former President Donald Trump's media company public.
Michael and Gerald Shvartsman admitted to a single count of securities fraud in Manhattan federal court, with sentencing scheduled for July 17 by Judge Lewis J. Liman.
The brothers acknowledged that they were aware of the criminal nature of their actions when they engaged in trades in October 2021 through a New York broker, purchasing shares of Digital World Acquisition Corp., a blank check company intended for taking another company public without an IPO. They had received inside information that Digital World was set to merge with Trump Media & Technology, the primary asset being the social media platform Truth Social.
Following the announcement of the deal with Trump Media, shares of Digital World experienced a surge of over 800% in October 2021.
The indictment against the brothers made no allegations against Trump — who is once again running for the presidency this year — or Trump Media & Technology Group. The latter recently commenced trading on the Nasdaq stock market and currently holds a value of approximately $6.7 billion, with Trump possessing a 57% stake in the company.
Gerald Shvartsman stood before the judge, admitting his grave error. "I've made a terrible mistake," he confessed, acknowledging the wrongdoing that will haunt him for life.
His brother, in a similar vein, acknowledged the illegality of their securities trades during the court proceedings.
An indictment revealed that the Shvartsman brothers invested millions in Digital World, later selling the securities for a hefty $22 million profit following the news of the Trump Media business going public.
Confiding in Others
Court documents indicated that Michael Shvartsman, who owned Rocket One Capital LLC at the time, shared their insider information with friends and employees, leading to additional purchases of securities before the merger announcement with Trump Media & Technology Group.
Their actions were met with anticipation from Trump's supporters, who eagerly awaited the merger and public trading of Trump Media & Technology Group. Many saw the Truth Social platform as a fitting response to Trump's temporary removal from certain social media platforms after the events of January 6, 2021, at the U.S. Capitol.
Both Michael Shvartsman, 53, from Sunny Isles Beach, Florida, and Gerald Shvartsman, 46, from Aventura, Florida, are currently out on bail as they await sentencing following their arrests last June.
Two brothers involved in an insider trading scheme based on a SPAC merger have pleaded guilty. Federal sentencing guidelines outlined in plea letters recommend that Michael Shvartsman should serve approximately four years in prison, while his brother is facing a minimum of three years behind bars. As part of the plea deals, Michael Schvartsman is expected to forfeit $18.2 million in profits, and his brother will have to give up $4.6 million.
U.S. Attorney Damian Williams emphasized in a statement that insider trading is a form of cheating and that the convictions serve as a reminder that any attempts to manipulate the stock market will result in prison time.
