- Two brothers were accused of insider trading ahead of Trump Media’s initial public offering.
- Michael Schwartzman and Gerald Schwartzman each pleaded guilty to one count of securities fraud.
- Prosecutors say the brothers netted $22 million from the scheme.
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Two brothers accused of participating in an insider trading scheme ahead of the public offering of former President Donald Trump’s social media platform Truth each pleaded guilty Wednesday to securities fraud charges.
According to the indictment, suspects Michael and Gerald Schwartzman of Florida are planning to use Digital World Acquisition Corporation (SPAC) to acquire Trump Media & Technology Group and take it public. He was charged with engaging in illegal transactions after knowing about the incident in private. Trump Media is the parent company of Truth Social.
“Michael and Gerald Schwartsman admitted in court that they received confidential inside information about the upcoming merger of DWAC and Trump Media and used that information to conduct lucrative but illegal open market transactions.” said U.S. Attorney Damien Williams. stated in a statement.
The brothers were first arrested in June last year. One count of securities fraud carries a maximum sentence of 20 years in prison, according to the U.S. Attorney’s Office for the Southern District of New York. The two brothers are scheduled to be sentenced in July.
Authorities say they made more than $22 million thanks to the scheme, and Michael used $14 million to buy a yacht they named the Provocateur. The New York Times reported.
A third suspect, Bruce Garelick, has also been charged and is scheduled to go to trial later this month, the Times reported. Garelick’s attorney did not immediately respond to a request for comment from Business Insider.
The indictment does not allege that Trump was involved in the scheme.
“Insider trading is fraud, plain and simple, and today’s conviction will earn anyone tempted to undermine the health of the stock market a ticket to prison. This should serve as a reminder of that,” Williams’ statement continued.
In other Truth Social news stories, parent company Trump Media is suing co-founders for harming the business and trying to block the DWAC merger.
Trump Media shares plunged Monday after the company said it had a net loss of $58 million last year on revenue of $4.1 million, reducing the former president’s net worth by more than $1 billion.