August 15, 2022

GRAND JURY: Trump’s Truth Social merger partner served with subpoenas

GRAND JURY: Trump's Truth Social merger partner served with subpoenas

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The blank check company taking Trump’s social media platform Truth Social public was just subpoenaed by a New York federal grand jury.

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Every board director of  Digital World Acquisition Corp. was served a subpoena in an investigation launched by the Securities and Exchange Commission (SEC) that accuses the company of soliciting potential “targets” prior to its own IPO, according to Axios. In late May, the special-purpose acquisition company (SPAC) Digital World Acquisition Corp. disclosed $1 billion in PIPE (private investment in public equity) funding from 48 investors.

While most are hedge funds, one investor sticks out – Truth SPC. A company registered only to a P.O. Box in Kentucky, and under the control of Nathan Smith, Truth SPC is the largest stakeholder in Digital World Acquisition Corp. with 11.35 million shares, according to Dealflow.

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Both the SEC and the Department of Justice have open investigations into the merger of Digital World Acquisition Corp. and the parent company of Truth Social, Trump Media & Technology Group. In December 2021, Digital World Acquisition Corp. announced the investigations. The merger came under scrutiny for leaving out key information about the company, such as Trump Media & Technology Group’s (TMTG) executive management team, and only providing the first name and last initial of its claimed 30 employees in its pitch deck. It did not disclose its investors at the time, instead only making optimistic projections of $3.6 billion in revenue by 2026 and promising a streaming platform with 40 million users.

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This can be seen as misleading, considering in its filing with the SEC, Digital World cites Trump’s failed business history in previous filings and says that “TMTG’s management team may not successfully or efficiently manage its transition to being a public company.” Dealflow reported that Digital World Acquisition Corp. has admitted to the cost of doing business with Trump on the Truth Social platform, saying “Our ability to attract users may decrease. Failure to attract a sufficient user base would adversely affect TMTG’s business prospects.”

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When it comes to Trump, and those doing business with him, there are always red flags, and Truth Social is no different. SPACs are shell companies and don’t have the same oversight and scrutiny as traditional IPOs. And most PIPE (Private Investment in Public Equity) deals, don’t register shares until after the merger. This could lock up trades for a specified amount of time. But if the merger of Digital World Acquisition Corp. and Trump Media & Technology Group to operate Truth Social goes through, the billions of dollars in shares will be available to trade immediately.

Though the investigations are still underway, and no formal charges have been filed against either company, the fact that the SEC is issuing subpoenas isn’t a positive sign that one has been on the up and up. But if investors choose to give their money to a six-times-bankrupt, one-term President under investigation by the New York Attorney General’s office, and one step closer to being indicted for trying to overthrow the government – they just may get what they deserve.

Follow Ty Ross on Twitter @cooltxchick

Ty Ross

News journalist for Washington Press and Occupy Democrats.

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