SEC charges former DWAC Board member and others for insider trading
The Securities and Exchange Commission (SEC) today filed insider trading charges against Bruce Garelick, a former board member of Digital World Acquisition Corporation (DWAC), a special purpose acquisition company (SPAC); Michael Shvartsman and his firm Rocket One Capital LLC; and Gerald Shvartsman for trading in advance of DWAC’s October 2021 announcement that it had reached an agreement to acquire Trump Media & Technology Group Corp. (TMTG).
The SEC’s complaint alleges that, after DWAC appointed Garelick as a member of its board of directors in September 2021, Garelick learned about, and voted on, material nonpublic actions and updates regarding the negotiations between DWAC and its merger target, TMTG.
Garelick, who was separately employed as the chief strategy officer at Rocket One Capital, then allegedly shared those updates with his boss, Michael Shvartsman, who in turn shared them with his brother, Gerald Shvartsman. Each then allegedly purchased DWAC securities on the open market based on the material nonpublic information they learned about DWAC. Michael Shvartsman placed his trades through an account in the name of Rocket One Capital.
The defendants then sold their positions shortly after DWAC announced it had signed a merger agreement with TMTG and collectively realized illicit profits of more than $22.9 million from those trades.
The complaint further alleges that, despite being a DWAC director and thus having certain reporting obligations, Garelick failed to file SEC Forms 4 and 5 related to his transactions in DWAC securities.
The SEC’s complaint, filed in the United States District Court for the Southern District of New York, charges the defendants with violating the antifraud provisions of the federal securities laws and also charges Garelick with violating the reporting obligations of Section 16 of the Exchange Act.
The complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against all defendants, as well as officer and director bars against Garelick and Michael Shvartsman.