Two Brothers Plead Guilty in $22 Million Insider Trading Scheme
Venture Capitalists Admit Guilt in Illegal Securities Trading
Florida venture capitalist Michael Shvartsman, 53, and his brother, Gerald, 46, pleaded guilty on Wednesday to one count of securities fraud in connection to a $22 million insider trading scheme. The case revolves around the company that took former President Trump’s social media company public.
Illegal Trading of Nonpublic Information
The brothers are accused of trading on confidential information in October 2021 relating to the acquisition of Digital World Acquisition Corp. (DWAC) by Trump Media & Technology Group, the parent company of the social media network Truth Social.
Details of the Scheme
The Department of Justice alleges that the Shvartsman brothers obtained confidential information regarding the merger between DWAC and Trump Media. They used this information to purchase DWAC securities on the open market, ahead of the public announcement of the merger.
Confessions and Maximum Sentence
During their court appearance, Michael and Gerald Shvartsman acknowledged the reception and subsequent utilization of the insider information for their own financial gain, though the trades were considered illegal. Securities fraud carries a maximum sentence of 20 years in prison.
Strong Words from the U.S. Attorney
U.S. Attorney Damian Williams, in a press release Wednesday, stated that insider trading is a clear case of cheating and emphasized that these convictions serve as a reminder that corrupting the stock market’s integrity will lead to imprisonment.
Additional Arrest and Upcoming Trial
The brothers were taken into custody last year alongside Bruce Garelick, an individual employed at Michael Shvartsman’s venture firm. Garelick, who served on DWAC’s board of directors, is accused of providing the Shvartsman brothers with crucial information concerning the forthcoming deal under investigation. Garelick is expected to stand trial at the end of this month.
Remaining Legal Proceedings
As the legal proceedings continue, attorneys for the defendants are yet to be reached for comment.
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