Trump media company subpoenaed in federal criminal probe of SPAC deal
Source: CNBC
Donald Trump’s media company was subpoenaed by a federal grand jury in connection with a criminal probe, according to the company with which the former president’s firm plans to merge.
Digital World Acquisition Corp. said in a filing Friday that Trump Media and Technology Group received a subpoena from the grand jury in Manhattan on Thursday. The Trump company also received a subpoena from the Securities and Exchange Commission regarding a civil probe on Monday, DWAC said.
DWAC also said some current and former TMTG employees have also recently received grand jury subpoenas. Later Friday, TMTG said it would comply with the subpoenas, and that none of them were directed at its chairman, Trump, or CEO, former U.S. Rep. Devin Nunes.
The filing came days after DWAC said the government investigations could delay or even prevent its merger with Trump’s newly formed company, which includes Truth Social, a social media app intended to be an alternative to Twitter.
Neither TMTG nor a spokeswoman for Trump immediately responded to CNBC’s requests for comment.
The Justice Department and the SEC, which regulates the stock market, are investigating the deal between DWAC and Trump Media. By merging with DWAC, which is a kind of shell company called a special purpose acquisition company, or SPAC, Trump’s firm would gain access to potentially billions of dollars on public equities markets.
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Please remember that I am a securities attorney and this is interesting to me. Special purpose acquisition corporations are relatively new investment vehicles and take the place of using so called public shells to go public. Public shells are in effect failed public companies that had no assets but had more than 500 shareholders and were in effect reporting companies. People would use public shells for pump and dump deals where they put some assets into the shell and promoted the company to run up the stock price so as to profit by dumping the stock.
SPACs are different in that a shell corporation can raise several hundred million dollars with the promise that the new entity will be buying a real company. A bunch of shady types formed Digital World Acquisition ("DWA"
and raised $290 million and then entered into a merger agreement to merge with and into Trump Media & Technology ("TMT" which is essentially a shell with no revenue and $59,000 of assets on its balance sheet. The result of the merger would be that TFG would have access to a couple of hundred million dollars to pursue his plan to build a media empire. The only asset of the combined company would be a ton of cash and Truth Social.
This was an abuse of the SPAC structure and there were some clear problems. A while back the SEC subpoenaed DWA. Later the DOJ acting through a grand jury subpoenaed DAC and its officers. This week, the DOJ pursuant to a grand jury and the SEC both subpoenaed TMT and certain of its officers (TMT is claiming that neither TFG nor Devon Nunes were subpoenaed).
Link to tweet
https://www.msnbc.com/rachel-maddow-show/maddowblog/subpoenas-point-even-trouble-trumps-media-venture-rcna35665
Because the former president has a history of bankruptcies and loan defaults, he couldn’t simply go to a major American financial institution to help bankroll his media venture. So, Trump agreed to merge his operation with a special purpose acquisition company (SPAC), called Digital World Acquisition. As the Times has reported, “To get his deal done, Mr. Trump ventured into an unregulated and sometimes shadowy corner of Wall Street, working with an unlikely cast of characters.”
Indeed, as we discussed late last year, the Republican ended up working with a dubious Chinese operation, all of which apparently drew the interest of investigators at the SEC and the Financial Industry Regulatory Authority (FINRA), which typically investigates things like insider trading.....
To be sure, as Rachel explained on the show last night, this isn’t the only criminal investigation surrounding the Republican, but it is one of the former president’s biggest headaches. As Axios recently reported, “Truth Social’s financial prospects are heavily reliant on investment tied to the merger.”
The more the investigations delay the merger being finalized, the more it’s an open question as to whether Trump’s venture will ever get the capital it’s looking for.
Now both TFG's company is also the subject of SEC and DOJ subpoenas.
This will be fun to watch