Two brothers pleaded guilty in federal court Wednesday for their roles in a $22 million insider trading scheme connected to the company that took former President Trump’s social media company public.
Florida venture capitalist Michael Shvartsman, 53, and his brother, Gerald, 46, each pleaded guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison. U.S. District Judge Lewis Liman set the brothers’ sentencing hearing for July 17.
The brothers are accused of illegally trading on nonpublic information in October 2021 that Digital World Acquisition Corp. (DWAC), a shell company, planned to acquire Trump Media & Technology Group, the parent company of social media network Truth Social.
According to the Department of Justice, the brothers obtained confidential information about details of the deal, including the timeline of its announcement, and then bought millions of dollars’ worth of DWAC securities on the open market before the merger with Trump Media went public.
“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 press release Wednesday from the Department of Justice.
“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,” Williams added.
The Shvartsmans were arrested last June, along with a third individual, Bruce Garelick, who had worked at Michael Shvartsman’s Rocket One Capital venture firm. Garelick, who was placed on DWAC’s board of directors, is accused of providing critical information to the brothers about the forthcoming deal in 2021. Garelick is set to go to trial at the end of this month.
An attorney for Michael Shvartsman declined to comment. Attorneys for Gerald Shvartsman and Bruce Garelick did not immediately respond to requests for comment.
Updated at 5:08 pm.