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Trump Media investors charged with insider trading plead guilty to fraud

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Naruecha Jenthaisong/Getty Images
  • Two brothers were charged with insider-trading fraud ahead of Trump Media's public offering.

  • Michael and Gerald Shvartsman each pleaded guilty to one count of securities fraud.

  • The brothers pocketed $22 million combined from the scheme, prosecutors say.

Two brothers who were charged with participating in an insider-trading scheme ahead of Trump Media and Technology Group's public offering each pleaded guilty Wednesday to one count of securities fraud.

Michael and Gerald Shvartsman were charged with making illegal trades based on nonpublic knowledge that the special-purpose acquisition company Digital World Acquisition Corp. was going to acquire Trump Media and take it public, according to the indictment. Trump Media is Truth Social's parent company.

"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," Damian Williams, the US attorney for the Southern District of New York, said in a statement.

The brothers were first arrested in June on charges of securities fraud. One count of such charges carries a maximum prison sentence of 20 years, according to the US Attorney's Office of the Southern District of New York. Through their plea agreements, the government recommended sentences of three to five years. Both brothers are set to be sentenced in July.

According to authorities, they pocketed more than $22 million between them in the trades. Michael Shvartsmanl used some of the $14 million he made to buy a yacht he called Provocateur, The New York Times reports.

A third man, Bruce Garelick, was also charged and is set to go on trial later this month, the Times reported. Attorneys for Garelick did not immediately respond to a request for comment from Business Insider.

The indictment does not say Donald Trump had any involvement in the scheme.

"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 said.

Meanwhile, Trump Media is suing its cofounders for damaging the business and attempting to thwart the DWAC merger.

Shares in Trump Media tumbled more than 20% on Monday after it reported a net loss of $58 million last year and revenue of $4.1 million, causing the former president's net worth to fall by over $1 billion.

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