Brothers Michael and Gerald Shvartsman pleaded guilty to insider trading charges, admitting to illegally making over $22 million before the public announcement in 2021 that an acquisition firm was taking former President Donald Trump’s media company public. They entered their pleas to a single count of securities fraud in Manhattan federal court and are set to be sentenced on July 17. They acknowledged that they knew they were committing a crime when they made trades in October 2021 through a New York broker. The indictment against them did not implicate Trump or Trump Media & Technology Group, which owns Truth Social.
The brothers invested millions of dollars in the securities of the special purpose acquisition company Digital World Acquisition Corp. after being tipped off that Trump Media was a potential target of DWAC and another acquisition company, Benessere Capital Acquisition Corp. Once the news about the Trump Media business was made public, they sold their securities for $22 million in profits. Michael Shvartsman owned Rocket One Capital LLC at the time. They shared their secrets with friends and employees, who also bought securities ahead of the merger announcement with Trump Media & Technology Group.
The merger and public trading of Trump Media & Technology Group were eagerly anticipated by Trump’s political supporters, who saw the Truth Social platform as a response to his temporary ejection from some social media platforms after the Jan. 6, 2021, insurrection at the U.S. Capitol. The brothers remain free on bail while they await their sentencings after being arrested last June. Federal sentencing guidelines in plea letters recommend that Michael Shvartsman receives about four years in prison and his brother spends at least three years behind bars. They are also required to forfeit millions of dollars in profits.
U.S. Attorney Damian Williams stated, “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 men acknowledged that they knew their actions were wrong and illegal, with Gerald Shvartsman expressing remorse, saying he had made a terrible mistake that he will pay for dearly for the rest of his life. The indictment did not implicate Trump, who holds a 60% stake in Trump Media & Technology Group.
The Shvartsman brothers’ insider trading scheme involved trading securities before the public announcement of the merger involving Trump Media, resulting in $22 million in profits. The guilty pleas highlight the importance of maintaining integrity in the stock market and serve as a warning to others who may be tempted to engage in similar illegal activities. The sentencing recommendations reflect the seriousness of the crimes committed by the brothers, who will face consequences for their actions.
