Digital World Acquisition Corp. (DWAC), the special purpose acquisition company slated to merge with Trump’s Trump Media & Technology Group (which is behind Truth Social) and help bring it public, is now under even more investigation by federal authorities. In other words, the business operation behind and tied to Truth Social is facing heat.
As reported in Fortune, an investigation at the Securities and Exchange Commission (SEC) — which isn’t the only federal entity looking into DWAC — appears to hinge on whether negotiations between DWAC’s side and Trump’s team took place before DWAC went public last year, which federal law prohibits. In a filing earlier this month, DWAC revealed the SEC sought “communications regarding and due diligence of potential targets other than” Trump’s company, suggesting the agency wanted to closely look at whether there’d been any alternatives explored inside DWAC for the company with which it would merge. Now, federal grand jury subpoenas have gone out to each of the members of DWAC’s board of directors and the company itself. Federal prosecutors are pursuing documents including materials the SEC has also targeted.
The merger deal involving DWAC and Trump’s company has yet to be finalized, and it sounds like federal investigative efforts could potentially derail what those on the former president’s side are planning on as Donald’s social media efforts move forward. “Any resolution of the investigation could result in the imposition of significant penalties, injunctions, prohibitions on the conduct of Digital World’s business, damage to its reputation, and other sanctions against Digital World,” DWAC said in that earlier filing regarding the SEC probe.
DWAC “reported that the subpoenas and related investigations by the Department of Justice and the Securities and Exchange Commission could delay its acquisition of the maker of Trump’s Truth Social app,” as the Associated Press summarized it. Truth Social is the Trump-backed alternative social media site that emerged after the former president was banned from mainstream platforms such as Twitter. There was a 6 percent drop in premarket trading of the value of DWAC shares after the subpoena news emerged. The federal grand jury that issued the subpoenas is in the Southern District of New York.
“Digital World also said Bruce Garelick, chief strategy officer of Rocket One Capital, a Miami-based investment firm, was resigning from the board,” Reuters explains. The grand jury’s pushes for information also covered communications with Garelick’s company. Both the federal grand jury inquiry and the SEC probe have also covered other investigative ground, although some of those SEC details are what the agency’s apparently been most recently focused upon. The Trump Media & Technology Group indicated that it would cooperate with federal investigative efforts. They’ll comply with federal “oversight that supports the SEC’s important mission of protecting retail investors,” as the company put it — although that phrasing suggests they could argue the SEC’s DWAC investigation isn’t actually in line with that while still trying to maintain moral high ground. The share price for DWAC has been on a consistent decline over the course of this year: as of early Monday, it had lost over half the value it had at the beginning of the year, and it was approaching a 10 percent drop just on Monday.