Trump SPAC deal threatened by federal criminal investigation

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

Shannon Stapleton | Reuters

A federal criminal investigation threatens the proposed merger between former President Donald Trump’s social media firm and a special-purpose acquisition firm.

That company, Digital World Acquisition Corp., disclosed in a securities filing on Monday that it learned on June 16 that each member of its board of directors had received subpoenas from a federal grand jury in New York. The grand jury wants documents similar to those the Securities and Exchange Commission was seeking in its already leaked civil investigation, DWAC said. The company itself received a subpoena on Friday with similar demands.

DWAC has warned that subpoenas and investigations by the SEC and the US Department of Justice could delay or even prevent its merger with Trump’s social media company. Shares of the company fell more than 9% in early trading. DWAC did not immediately respond to a request for comment.

The development is the latest political headache for Trump. Due to public hearings held by the committee investigating the Jan. 6 pro-Trump assault on the Capitol, Trump faces intense scrutiny over his alleged role in conspiracies to overturn the 2020 election results. He is considering also to enter the race for the White House in 2024.

The Trump Media & Technology Group announced in October that it had agreed to merge with DWAC with the ultimate goal of making Trump’s company “a publicly traded company, subject to regulatory and shareholder approvals.” . The merger would give Trump’s company and its social media platform, Truth Social, more than $1 billion in capital and its own stock market listing.

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

Trump’s company is run by former GOP Rep. Devin Nunes, who was one of Trump’s staunchest defenders in Congress. Trump Media’s Truth Social has already launched. The former president founded him as an alternative to Twitter, which banned him for his tweets on January 6 as he continued to push the false narrative that the election was stolen from him.

DWAC also disclosed Monday that board member Bruce J. Garelick told management he would be resigning from the board last Wednesday. Garelick said his resignation “was not the result of a disagreement with the operations, policies or practices of Digital World,” according to the company filing.

The disclosures mark the latest setback to the so-called SPAC, which is a type of shell company created to raise capital on public stock markets with the ultimate goal of buying or merging with a private company.

Truth Social and its planned tie-up with DWAC ran into problems from the start.

One of the earliest criticisms came from Sen. Elizabeth Warren, D-Mass., who urged SEC Chairman Gary Gensler in November that DWAC “may have committed securities violations by holding private discussions and not disclosed on the merger as early as May 2021, while omitting this information in [SEC] filing and other public statements. »

CNBC’s Thomas Franck contributed to this article.

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