SEC Files Charges Against Former Digital World Acquisition Corp. Board Member
The U.S. Securities and Exchange Commission (SEC) has recently filed charges against three individuals, a notable one amongst them being Bruce Garelick, who is a former board member of Digital World Acquisition Corp. (DWAC). The other two individuals charged by the SEC are Gerald Shvartsman, who happens to be Garelick’s boss at a private equity firm called Rocket One Capital, and Michael Schwartsman, Gerald’s brother.
Charges Filed and Background to the Case
The key charge against these individuals is that they traded on insider information that they acquired about DWAC’s plan to acquire Trump Media & Technology Group. More specifically:
- Garelick was involved in the decision-making process of DWAC’s plans to acquire a company owned by former President Donald Trump due to his position as a board member.
- The two Shvartsmans used insider information to conduct trades that allegedly generated a significant sum of $20 million in unlawful profits.
Significance of Garelick’s Role
The SEC maintains that Garelick played a pivotal role in the case, due to his former position on the DWAC board. As such, he had a vital vote on the move to acquire the company owned by former President Donald Trump, which operates the social media platform Truth Social.
Code of Conduct Violation Allegations
By voting on this significant move, he became privy to inside information regarding DWAC’s impending merger announcement. However, Grewal, Director of the SEC’s Division of Enforcement, pointed out in his statement that Garelick had a duty to maintain the privacy and confidentiality of such information.
“As a board member, Garelick not only had access to information about DWAC’s upcoming merger announcement, but also a duty to maintain the confidentiality of that information,” noted Gurbir S. Grewal.
But according to the SEC, instead of honoring his duty as an insider, it is alleged that Garelick failed to uphold this professional responsibility. Greval further alleges that Garelick, in cooperation with the Shvartsmans, exploited the confidential information for financial gain.
Allegations of Illicit Profit Generation
The SEC’s charges extend to Gerald Shvartsman, who is Bruce Garelick’s boss at Rocket One Capital, and Gerald’s brother, Michael. In their complaint, the SEC alleges that the Shvartsmans also traded on inside information. These alleged ill-practices apparently resulted in the generation of $20 million in illicit profits, a significant sum that adds a substantial weight to the charges.
Quote from the SEC
“Rather than adhere to his duty as an insider, we allege that Garelick, together with the Shvartsmans, monetized that information,” stated Grewal.
The SEC’s bold move in filing these charges demonstrates their commitment to maintaining the integrity of the financial market and the concept of fair play within the same. It underlines that the misuse of insider information for personal profit or any other ulterior motives is viewed as a threat to a fair and open market that benefits all participants.