Bruce Garelick walks following a hearing at the Manhattan Federal Court, in New York City, July 20, 2023.
Amr Alfiky | Reuters
A federal jury in New York on Thursday convicted an investor of insider trading in the stock of a shell company ahead of its announcement in October 2021 that it would merge with Trump Media.
The investor, Bruce Garelick, had been on the board of directors of the publicly traded company, Digital World Acquisition Corp., at the time it was negotiating plans to merge with then-privately heldTrump Media, the owner of the Truth Social app.
Trump Media’s majority shareholder is former President Donald Trump, who was not accused of any wrongdoing in the case against Garelick in U.S. District Court in Manhattan. But Garelick’s trial, which began on April 30, took place just blocks away from where Trump is on trial in Manhattan Supreme Court on criminal charges related to a hush money payment to porn star Stormy Daniels.
Two co-defendants of Garelick, the brothers Michael and Gerald Shvartsman, pleaded guilty to insider trading charges on April 3.
Jurors in Garelick’s case began deliberating on Wednesday afternoon after hearing closing arguments from prosecutors and a defense lawyer.
Garelick was an investment advisor to Michael Shvartsman’s venture capital firm. Prosecutors said Garelick shared non-public material information about DWAC’s merger plans with Trump Media with the Shvartsman brothers in 2021.
All three men then bought up DWAC stock based on that non-public information and then sold their shares after the price soared following the announcement of the deal to combine with Trump Media, prosecutors said.
Garelick made a profit of just $49,000 on the illicit trades, but the Shvartsmans earned a whopping $22 million, according to prosecutors.
“Bruce Garelick was part of a sophisticated group of individuals invited to invest in Digital World Acquisition Corporation …, a special purpose acquisition company that had raised funds with the intention of later investing in a target company, Trump Media & Technology Group, not yet known to the public,” said Manhattan U.S. Attorney Damian Williams in a statement Thursday.
“When he was given that opportunity, Garelick promised to keep the information about DWAC’s interest in acquiring Trump Media secret and not use it to trade in the stock market. Garelick was also given a seat on DWAC’s board, which gave him direct access to additional non-public information regarding the acquisition,” Williams said.
“As a unanimous jury has just found, Garelick blatantly violated the law by using the information that he obtained as an insider at DWAC to trade and tip others,” the top prosecutor said. “Garelick’s federal conviction is yet another stark reminder that insider trading is always a losing bet.”
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