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Bruce Garelick was convicted of securities fraud for leaking confidential information about a merger involving the parent company of Truth Social, Donald Trump’s social media site.
May 9, 2024, 1:15 p.m. ET
A federal jury in Manhattan on Thursday convicted a financial executive on securities fraud charges arising from a multimillion-dollar insider trading scheme that involved the merger of former President Donald J. Trump’s social media company with a publicly traded shell company.
Federal prosecutors had charged Bruce Garelick with five counts of securities fraud and conspiracy. Authorities claimed Mr. Garelick leaked confidential information to to his boss and at least one other person that Trump Media & Technology Group, the parent company of Truth Social, was getting close to announcing a merger in October 2021 with Digital World Acquisition Group, the shell company.
The information helped two brothers — Michael Shvartsman and Gerald Shvartsman — make nearly $23 million in illegal trading profits by buying Digital World securities in advance of the announcement, which sent the stock soaring. Mr. Garelick, who worked for Michael Shvartsman at a small Miami-based venture capital firm called Rocket One, made about $50,000 by trading off what authorities said was nonpublic information.
Last month, the Shvartsman brothers decided to forgo a trial and pleaded guilty to securities fraud charges. In their plea agreements, prosecutors have recommended a sentence of roughly four to five years for Michael Shvartsman; and three to four years for his younger brother.
Authorities said Michael Shvartsman used some of the proceeds from the scheme to buy a $14 million luxury yacht that he named Provocateur.
In court filings, prosecutors identified several other people who made profitable trades around the time of the merger announcement but none of them were charged with wrongdoing.
