(Bloomberg) -- An investor in the company that took Donald Trump’s social media startup public was ordered to serve more than two years in prison for trading on confidential information about the company’s merger plans before the deal was announced.
Bruce Garelick was sentenced to 28 months behind bars on Thursday by US District Judge Lewis Liman in New York. In May, a jury convicted Garelick of trading on secret details he had learned about Digital World Acquisition Corp. before the Trump deal was revealed three years ago.
Garelick, 54, was one of three Digital World investors charged by federal prosecutors in Manhattan in June 2023 with making more than $22 million through insider trades. The others, brothers Michael and Gerald Shvartsman, pleaded guilty to securities fraud in April. Gerald was sentenced to 22 months last month, and Michael got 28 months the following day.
The Shvartsmans and Garelick were early investors in Digital World and had signed nondisclosure deals with the company that gave them access to secret data about its merger targets, which included Trump’s social media company, Trump Media & Technology Group Corp.
In October 2021, Digital World announced an agreement to merge with Trump Media, sending the shares soaring and handing the three men millions of dollars in profit from trades they made beforehand, prosecutors said. The merger, which was finally completed in March of this year, allowed the media startup, which operates Trump’s Truth Social platform, to begin trading as a public company.
Prosecutors said Michael Shvartsman, the founder of Rocket One Capital LLC, a Miami-based venture capital firm where Garelick was the chief strategy officer, was entrusted with confidential information about the merger through a special purpose acquisition company, or a SPAC, and arranged for Garelick, an employee of one of his businesses, to serve on the SPAC’s board. But while Michael Shvartsman made about $18 million trading on the information, Garelick made less than $50,000.
The judge noted that the number of trades by Garelick and the amount of money he made “pales in comparison” to Michael Shvartsman, and that he traded in warrants instead of stock. But he said Garelick owed a greater duty to keep the information confidential because he was a member of the SPAC’s board.
“He betrayed the trust imposed on him as a board member by trading himself and tipping others,” Liman said.
The case is US v. Shvartsman, 23-cr-307, US District Court, Southern District of New York (Manhattan).
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