The Securities and Exchange Commission (SEC) has recently reached a settlement in a fraud case involving Digital World Acquisition Corp. (DWAC), the company responsible for the potential public offering of former President Donald Trump’s social media venture. Just a month ago, the SEC charged three individuals from Florida with insider trading of DWAC stocks prior to the announcement of its merger plans with Trump Media and Technology Group. As a result of the settlement, DWAC shares experienced a significant 30% increase in after-hours trading following the SEC’s announcement.
Fraudulent Claims Regarding SPAC Merger Discussions
The SEC’s fraud charges are primarily rooted in DWAC’s alleged extensive discussions about a merger with Trump’s media company, which took place months before the company filed for its initial public offering in September 2021. The SEC discovered that DWAC made false statements in its filings, claiming that neither the company nor its officers and directors had engaged in any discussions with potential target companies prior to the IPO. However, the SEC’s investigation revealed that SPACs, or special purpose acquisition companies like DWAC, are prohibited from soliciting specific merger targets prior to filing for an IPO.
Failure to Disclose Conflicts of Interest
Furthermore, the SEC found that DWAC’s former CEO, Patrick Orlando, failed to disclose conflicts of interest related to a separate deal he had made with Trump Media and Technology Group. This lack of transparency regarding Orlando’s personal interests and involvement in the merger deal raised concerns about potential violations of fiduciary duty. As a result of the settlement reached with the SEC, DWAC has been ordered to pay an $18 million civil penalty fee.
Implications and Future Updates
This breaking news regarding the settlement of fraud charges against DWAC highlights the regulatory scrutiny surrounding SPACs and their merger activities. The SEC’s enforcement actions serve as a reminder that companies involved in SPAC mergers must adhere to strict regulations to ensure transparency and protect investors’ interests. The outcome of this settlement may also have implications for the future of Trump’s social media venture and its plans to go public. As this story continues to develop, it is advisable to stay tuned for further updates.
Please note that the information provided in this article is based on the latest available news and may be subject to change as more details emerge.
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