The publicly traded company that plans to merge with Donald Trump‘s new social media venture revealed on Monday that it is being investigated by federal regulators.
The disclosure came in a filing by Digital World Acquisitions Corp – a special purpose acquisition company (SPAC) or ‘blank check’ company – that said the Securities and Exchange Commission and the Financial Industry Regulatory Authority and FINRA regulatory agencies had asked for details of stock trading and communications with Trump’s company before the deal was announced.
It deals a blow to Trump’s plans for an anti-censorship site two days after he announced his Truth Social had raised a further $1 billion in investments.
Sen. Elizabeth Warren called for an investigation last month, citing press reports that DWAC had been in talks with Trump since March, before the SPAC went public -possibly in breach of rules.
In a filing on Monday, DWAC said it had been asked by FINRA for information about its activities ahead of announcing a merger with Trump’s company.
‘According to FINRA’s request, the inquiry should not be construed as an indication that FINRA has determined that any violations of Nasdaq rules or federal securities laws have occurred, nor as a reflection upon the merits of the securities involved or upon any person who effected transactions in such securities,’ it said.
Details of the investigations by the SEC and the Financial Industry Regulatory Authority were disclosed in an 8-K filing made by by Digital World Acquisition Corp., the special purpose acquisition company, to the SEC on Monday
Trump is working to launch his Truth Social platform in the first quarter of 2022. On Saturday, he announced it had raised $1 billion as part of his ‘anti-censorship’ push
Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt
The filing also said the SEC had asked for ‘certain documents and communications’ between it and the Trump Media Technology Group.
‘According to the SEC’s request, the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person, event, or security,’ it said.
Trump is working to launch TRUTH Social during the first quarter of 2022.
Announcing the injection of cash into his upcoming site TRUTH Social, Trump said: ‘$1bn sends an important message to Big Tech that censorship and political discrimination must end.
‘As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech.’
TRUTH Social is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.
Linking up with a SPAC offers a short-cut to sell shares publicly.
Patrick Francis Orlando (pictured), 49, is helping ex-President Donald J Trump take his media and technology company public. He heads two SPACs as the CEO of Digital World Acquisition Corp (DWAC) and the CFO of Yunhong International, which has offices in Wuhan, China
SPACs, such as Digital World, are set up with the sole purpose of merging with another entity.
Rules require that when SPACs go public, they must disclose whether they have engaged in merger talks.
But the rules require that they must go public before deciding on the target of their merger.
It raised nearly $300 million in an initial public offering in September.
Last month, Sen. Warren wrote to regulators saying that Digital World had not disclosed any merger talks.
‘However, one press report indicates that Patrick Orlando, the SPAC’s sponsor, was discussing a deal with former President Trump as early as March 2021, months prior to the SPAC’s initial filing in May 2021 and public offering in September 2021,’ she wrote.
‘These appeared to have been detailed discussions: at the March meeting, “[t]he investor presentation about the planned deal envisioned the combined company, which would offer a social media app, films, events and eventually a variety of technology services, being worth $15 billion and rivaling tech giants like Netflix and the cloud divisions of Amazon and Google.”‘