Because Of Course: Trump's SPAC Deal May Have Broken The Law
from the on-brand dept
If you thought that Trump’s new Truth Social website’s potential legal problems with its apparent failure to abide by the license on the open source code it seems to be using would be the worst legal problems facing the site, well, you underestimated The Donald. There’s been plenty of talk about the SPAC deal that valued the company at billions of dollars through one of those reverse merger IPOs. But, now the NY Times is reporting that the way the deal was done may have violated securities laws. So on brand.
To get his deal done, Mr. Trump ventured into an unregulated and sometimes shadowy corner of Wall Street, working with an unlikely cast of characters: the former ?Apprentice? contestants, a small Chinese investment firm and a little-known Miami banker named Patrick Orlando.
Mr. Orlando had been discussing a deal with Mr. Trump since at least March, according to people familiar with the talks and a confidential investor presentation reviewed by The New York Times. That was well before his SPAC, Digital World Acquisition, made its debut on the Nasdaq stock exchange last month. In doing so, Mr. Orlando?s SPAC may have skirted securities laws and stock exchange rules, lawyers said.
SPACs sell their shares to investors through an initial public offering and then find a private company with which to merge. Because SPACs are empty vessels, stock exchanges allow them to list their shares without disclosing much financial information. But that creates opportunities for SPACs to serve as backdoor vehicles for companies to go public without receiving the kind of investor scrutiny they would in a traditional listing. To prevent that, SPACs aren?t supposed to have a merger planned at the time of their I.P.O.
And it gets worse:
Another issue is that Digital World?s securities filings repeatedly stated that the company and its executives had not engaged in any ?substantive discussions, directly or indirectly,? with a target company ? even though Mr. Orlando had been in discussions with Mr. Trump.
Given the politically fraught nature of a deal with Mr. Trump, securities lawyers said that Digital World?s lack of disclosure about those conversations could be considered an omission of ?material information.?
You don’t say.
Of course, given all this, how much do you want to bet that it would be Orlando on the hook for this, rather than Trump? Either way, the NY Times has more details suggesting that, despite Digital World insisting that it didn’t have any acquisition deals in place, everyone in Trump world was blabbering on about the SPAC deal they had set to go.
In early July, Phillip Juhan, a former financial analyst who had also been an executive at a bankrupt fitness company, was introducing himself to people as Trump Media?s chief financial officer. He said the company was in an ?exclusive agreement? with a SPAC, according to one of the people.
So now the question is, which is going to be more of a problem for Trump’s new operation? The Software Freedom Conservancy (SFC) or the SEC?