Trump Social Media Firm Subpoened by Feds, Stock Regulators (Dreamstime)
BERNARD CONDON Saturday, 02 July 2022 08:44 AM EDT
Donald Trump's social media company and some of its employees received subpoenas from both a federal grand jury and securities regulators, according to a public disclosure Friday, possibly delaying or even killing a deal promising a cash infusion needed to take on Twitter.
Trump Media & Technology Group received subpoenas from a grand jury in New York and the Securities and Exchange Commission, according to a securities document filed by Digital World Acquisition Corp. on Friday. Digital World has plans to buy Trump Media, releasing $1.3 billion for its fledging business, but the deal is unlikely to be done during two legal probes.
Trump, who is Trump Media's chairman, was not among the employees who received subpoenas, according to a Trump Media statement.
On Monday, Digital World announced it had received subpoenas from the same grand jury convened by the Manhattan U.S. Attorney's Office. Digital World has been under investigation by the SEC for possible violations for months, a development that has weighed on the stock.
Digital World stock closed Friday at $5.78, down 25% in a week. It had been at over $100 last year after the company announced it had a deal to buy the former president's social media firm.
The SEC has been looking into whether Digital World broke rules by having substantial talks about buying Trump’s company starting early last year before Digital World sold stock to the public for the first time in September. Just weeks later it announced it would be buying Trump’s company.
Digital World is one of a once-popular group of “blank-check” companies that go public as empty corporate entities with no operations, only offering investors the promise they will buy a business in the future. As such, they are allowed to sell stock to the public quickly without the usual regulatory disclosures and delays, but only if they haven’t already lined up possible acquisition targets.
Trump’s social media offering, called Truth Social, launched in February. It said it is fighting Big Tech limits on speech. Trump was banned from Twitter, Facebook and YouTube last year after the Jan. 6 Capitol riot.
Trump Media last year lined up dozens of investors to pump $1 billion into the company, but can’t get the cash until the Digital World acquisition is completed. An additional $300 million would come from Digital World itself.