Financier found guilty in Trump insider trading trial

A Manhattan federal jury on Thursday indicted a financial executive on securities fraud charges stemming from a multimillion-dollar insider trading scheme involving 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 alleged that Mr. Garelick leaked confidential information to his boss and at least one other person that Trump Media & Technology Group, Truth Social’s parent company, was close to announcing a merger in October 2021 with Digital World Acquisition Corporation, a subsidiary of Shell. a company.

This information helped brothers Michael Shvartsman and Gerald Shvartsman make approximately $23 million in illegal trading profits by purchasing Digital World securities before the announcement, sending the stock price soaring. Garelick, who worked for Michael Schwartzman at the small Miami-based venture capital firm Rocket One, received about $50,000 by bartering what authorities said was nonpublic information.

Last month, the Shvartsman brothers decided to waive trial and pleaded guilty to securities fraud charges. In plea agreements, prosecutors recommended a sentence of approximately four to five years for Michael Shvartsman and three to four years for his younger brother.

Michael Schwartzman used some of the proceeds from the scheme to buy a $14 million luxury yacht he called the Provocateur, authorities said.

In court filings, prosecutors identified several other people who made profitable trades around the time of the merger announcement, but none of them were accused of wrongdoing.

In theory, Mr. Garelick could be sentenced to at least 25 years in prison.

He stood before the jury wearing a dark suit and gray tie. After the verdict was announced, Mr. Garelick sat with his hand on his head and appeared emotional.

After leaving the courtroom with his family, Mr. Garelick declined to comment. The jury deliberated for approximately five hours. He is scheduled to be sentenced on September 12.

Mr. Garelick, 54, a former hedge fund manager, was a member of Digital World’s board of directors. He joined the board after Rocket One agreed to be an early investor in Digital World, which is structured as a special purpose acquisition company, or SPAC.

Digital World raised about $300 million from investors in its initial public offering in September 2021. A little more than a month later, the SPAC announced a merger deal with Trump Media. After a long delay, the merger was completed in March, and Trump Media became a publicly traded company. Trump’s 65% stake in the company is worth about $6 billion.

Mr. Garelick eventually resigned from Digital World’s board of directors after federal prosecutors issued subpoenas to the company in the summer of 2022 seeking information about Rocket One.

Evidence presented by prosecutors during the week-long trial showed that months before the Digital World publication, Mr. Garelick sometimes referred to the shell company as “Trump Media Group SPAC” in emails with people who invested alongside Rocket One.

In his closing argument, Daniel Nissim, the federal prosecutor, described Mr. Garelick as a “sophisticated professional” who “cheated” and used inside information to benefit himself and his boss, Michael Shvartsman.

Mr. Garelick testified on his behalf and said he never informed anyone about the status of the deal. He said he was helping his boss develop a strategy for trading securities acquired ahead of Digital World’s initial public offering. During the trial, Mr. Garelick’s lawyers suggested that another person, who was a friend of the Shvartsman brothers, may have been leaking updates about the deal.

The insider trading investigation was prompted by a spike in purchases of Digital World securities on the open market just days before the official announcement of a deal with Trump Media. At the time, Digital World was just one of several obscure SPACs that had gone public.

Mr. Garelick’s trial coincided with Mr. Trump’s first criminal trial, which is taking place in a New York state courthouse down the street. Trump was accused of participating in a scheme to hide financial payments to Stormy Daniels, a porn star, in the final days of the 2016 presidential campaign to suppress her story about a sexual relationship she said she had with Trump. . Trump card.

Kirsten Noyes Contributed to research.