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Slashdot: Did Trump's Truth Social Network Skirt US Securities Law?

Did Trump's Truth Social Network Skirt US Securities Law?
Published on October 31, 2021 at 04:04AM
To fund the Truth social network, former U.S. president Trump merged it with a special purpose acquisition company (or "SPAC"), reports the New York Times. "The result is that Mr. Trump — largely shut out of the mainstream financial industry because of his history of bankruptcies and loan defaults — secured nearly $300 million in funding for his new business." But there may be a hitch: To get his deal done, Mr. Trump ventured into an unregulated and sometimes shadowy corner of Wall Street, working with an unlikely cast of characters: the former "Apprentice" contestants, a small Chinese investment firm and a little-known Miami banker named Patrick Orlando. Mr. Orlando had been discussing a deal with Mr. Trump since at least March, according to people familiar with the talks and a confidential investor presentation reviewed by The New York Times. That was well before his SPAC, Digital World Acquisition, made its debut on the Nasdaq stock exchange last month. In doing so, Mr. Orlando's SPAC may have skirted securities laws and stock exchange rules, lawyers said... SPACs aren't supposed to have a merger planned at the time of their I.P.O. Lawyers and industry officials said that talks between Mr. Orlando and Mr. Trump or their associates consequently could draw scrutiny from the Securities and Exchange Commission. Another issue is that Digital World's securities filings repeatedly stated that the company and its executives had not engaged in any "substantive discussions, directly or indirectly," with a target company — even though Mr. Orlando had been in discussions with Mr. Trump. Given the politically fraught nature of a deal with Mr. Trump, securities lawyers said that Digital World's lack of disclosure about those conversations could be considered an omission of "material information." The Times adds that Trump had previously even discussed merging Trump Media with a smaller SPAC created with help from the same Shanghai-based investment bank — which "specialized in helping Chinese companies list on U.S. stock exchanges."

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