November 18, 2021

Warren Urges SEC to Investigate Potential Violations of Securities Laws During SPAC Merger with Trump Company

Digital World Acquisition Corp., while planning to merge with Trump Media and Technology Group, appears to have misled the public and filed misleading SEC statements

Text of Letter (PDF)

Washington, D.C. - United States Senator Elizabeth Warren (D-Mass.) sent a letter to U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler raising concerns about reports that Digital World Acquisition Corp. (DWAC) – the Special Purpose Acquisition Company (SPAC) that in October 2021 announced its plan to merge with former President Donald Trump’s Trump Media and Technology Group – may have violated securities laws by holding undisclosed discussions about the merger as early as May 2021 while omitting this information in SEC filings and other public statements. Senator Warren is requesting information from the SEC on its plans to respond to this alleged wrongdoing. SPACs – publicly traded shell companies that raise money to buy private companies and take them public –  are required to disclose any direct or indirect conversations with potential target companies. DWAC and Trump Media and Technology Group, however, appear to have brazenly flouted these rules. 

The reports about DWAC and Trump Media and Technology Group appear to be a textbook example of a SPAC misleading shareholders and the public about materially important information. DWAC indicated in numerous SEC filings between May 25, 2021 and September 8, 2021 that the organization had “not selected any specific business combination target” and had not “initiated any substantive discussions, directly or indirectly, with any business combination target.”

However, one press report indicates that 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. DWAC’s failure to disclose these talks during the process appears to be an omission of material information necessary for both early institutional investors and retail investors in the SPAC’s public offering. This omission had the result of enriching the SPAC’s sponsors and the leadership of theTrump Media and Technology Group while trapping retail investors in a stock bubble. 

“I have frequently spoken about the need to hold public officials accountable for lawbreaking and ethics violations. This includes the former President, who is not above the law. The reports that DWAC may have violated securities laws and harmed investors during its acquisition of Trump Media and Technology Group are deeply troubling and provide an opportunity for the SEC to follow through on its commitment to investigate wrongdoing and fraud in the SPAC space,” wrote Senator Warren

Senator Warren has requested responses by November 29, 2021. 

In September 2021, Senators Warren, Sherrod Brown (D-Ohio), Tina Smith (D-Minn.), and Chris Van Hollen (D-Md.) sent letters to six creators of prominent SPACs raising concerns about abuses by the creators and operators of SPACs, including reports that insiders are taking advantage of legislative and regulatory gaps at the expense of ordinary investors.