April 3 (UPI) — On Wednesday, two men pleaded guilty to illegal insider trading linked to a deal that took Trump Media and Technology Group public. Michael Shvartsman and his brother Gerald Shvartsman pleaded guilty to securities fraud.
They each face prison sentences of up to 20 years for making more than $22 million in illegal profits.
Their plea agreements recommend four to five years for Michael Shvartsman and three to four years for Gerald Shvartsman, but the judge isn’t required to make those sentences.
They must forfeit their illegal gains as part of the plea deal.
“Michael and Gerald Shvartsman admitted in court that they received confidential, inside information about an upcoming merger between DWAC and Trump Media and used that information to make profitable, but illegal, open-market trades,” U.S. Attorney Damian Williams said in a statement. “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.”
The DOJ said Wednesday that, according to the indictment and court proceedings, the two men were invited to invest in the shell company Digital World Acquisition Corporation and another special purpose acquisition company.
According to prosecutors, they illegally used confidential information that the companies planned to merge with Trump Media before the news was made public.
In court Gerald Shvartsman said in a statement to the judge, “I will pay dearly for it for the rest of my life.”
In addition to violating federal securities law, they also violated non-disclosure agreements they signed.
According to prosecutors, the Shvartsman brothers and a third man, Bruce Garelick, made the illegal trades. Garelick was a director of Digital World at the time.
Prosecutors said they also tipped off friends and colleagues about the coming Trump Media deal.
Trump Media shares took a nose-dive on April Fool’s Day after the company revealed a net loss of $52 million on revenues of just $4 million in 2023.
When it first went public share prices soared and Wall Street valuation had the company worth $5.2 billion on paper despite the abysmal revenue and profit fundamentals.
Trump Media, with Donald Trump as the dominant shareholder, has sued two of the company”s co-founders in an effort to force them from the company and surrender their shares in the company.
Wesley Moss and Andrew Litinsky, who were both once contestants on Trump’s Apprentice TV show, together control 7.5 million shares.
They sued Trump Media earlier this year in Delaware in a legal claim that their share of the company should be more.
In February 2022, Trump Media and Technology Group launched the social network Truth Social.
