Trump’s SPAC deal faces criminal investigation

Former US President Donald Trump applauds during the annual convention of the National Rifle Association (NRA) in Houston, Texas, USA, May 27, 2022.

Shannon Stapleton | Reuters

A federal criminal investigation threatens a proposed merger between former President Donald Trump’s social media company and a special purpose acquisition company, a deal that would give the combined company access to billions of dollars in public markets.

This company, Digital World Acquisition Corporation., is revealed in filing on Monday that on June 16 it became known that each member of the board of directors received subpoenas from a federal grand jury in New York.

A grand jury is seeking similar documents that the Securities and Exchange Commission was looking for in its now disclosed civil investigation, DWAC said. The company itself received a subpoena on Friday with similar requests, as well as other requests regarding communications, individuals and information relating to Rocket One Capital.

DWAC also reported on Monday that board member Bruce J. Garelik told management he was stepping down from the board last Wednesday. Garelik said his resignation “was not the result of any disagreement with the operations, policies or practices of Digital World,” according to a company statement.

Garelik is listed as the director of strategy for Rocket One Capital. He did not immediately respond to a CNBC request for comment. The Rocket One website was virtually empty on Monday morning, saying, “Site will be available soon. Thank you for your patience!”

The DWAC warned that subpoenas and investigations by the US Securities and Exchange Commission and the US Department of Justice could delay or even prevent the company’s merger with Trump’s social network. The company’s shares fell more than 8% to about $25 on Monday morning. Shares soared above $90 in October after a deal with the Trump group was announced.

DWAC did not immediately respond to a request for comment.

This event was Trump’s latest political headache. Evidence presented at a public hearing held by the House Committee of Inquiry Jan. On November 6, 2021, an attack by Trump supporters on the Capitol heightens attention to the former president’s alleged role in plots to reverse the 2020 election results. He is also considering running for the White House in 2024.

In October, Trump Media & Technology Group announced that it had agreed to a merger with DWAC, with the eponymous company’s ultimate goal of “becoming a public company subject to regulatory and shareholder approval.” This merger will provide Trump’s companies and its social media platform Truth Sociala capital of more than $1 billion and its own listing on the stock exchange. DWAC shares rose while.

Trump Media did not immediately respond to a request for comment.

The company is headed by a former member of the Republican Party. Devin Nunez, one of Trump’s most dedicated congressional defenders. Truth Social by Trump Media is now live. The former president founded it as an alternative to Twitter, which banned him for his Jan. 1 tweets. 6 as he continued to spread false information that the election had been stolen from him.

The disclosure marks the latest setback for SPAC, a shell company of sorts set up to raise capital in the public stock markets with the ultimate goal of buying or merging with a private firm.

Truth Social and its planned merger with the DWAC faced difficulties from the start.

One of the first criticisms came from a senator. Elizabeth Warren, of Massachusetts, who urged SEC Chair Gary Gensler in November that DWAC “may have committed securities violations by having private and undisclosed merger discussions back in May 2021 while omitting this information in [SEC] filing and other public statements.

DWAC shares have lost more than half their value in 2022. This is much worse than the poor performance of the overall market this year: S&P 500 decreased by about 18% over the same period.

– CNNBC Thomas Frank contributed to this article.