The report alleges that regulators are investigating a surge of unusual trading before the SPAC announced a deal with Trump Media & Technology Group (TMTG). It is believed that a few months before the deal was announced, word of the merger was leaked to Rocket One Capital, a Miami investment firm. A federal grand jury in New York has now issued subpoenas to board members of Digital World. One of the SPAC’s board members is Bruce Garelick, who serves as Rocket’s CIO.
Besides Rocket, ARC Capital was the only other corporate entity that regulators explicitly mentioned in the probe. The firm helped advise DWAC on the TMTG deal. It also helps foreign companies list their stocks in the U.S.
Garelick resigned from the board on June 22 after hearing about the subpoena. TMTG stated that it will continue moving forward with the planned merger and comply with any subpoenas.
DWAC Stock Under Pressure
Rocket One’s website is currently down for maintenance. Bloomberg reports that the site previously had shown that the firm invested in industries like entertainment and real estate. An attorney for the Miami-based firm denied that it had advance knowledge of the merger.
The probe follows an earlier request for information from the U.S. Securities and Exchange Commission (SEC). In December, the SEC requested documents from Digital World concerning board meeting minutes and procedures related to its interactions with TMTG. In addition, Sen. Elizabeth Warren believes that the deal may have violated securities laws. This is because former President Donald Trump had discussed arrangements with Digital World Founder Patrick Orlando before the SPAC even went public. Securities laws state that SPACs are not supposed to have a merger planned before their initial public offerings. Warren added:
The reports about DWAC and Trump Media and Technology Group appear to be a textbook example of a SPAC misleading shareholders and the public about materially important information.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.