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Senator Elizabeth Warren urges SEC to investigate Trump SPAC deal

Senator Elizabeth Warren, Massachusetts, holds a press conference at the Capitol on March 1, 2021.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Senator Elizabeth Warren on Thursday asked the Securities and Exchange Commission to investigate possible securities violations in a planned SPAC deal involving former President Donald Trump’s new social media platform.

Warren, a Democrat from Massachusetts, in a letter to the Chairman of the Securities and Exchange Commission Gary Gensler noted recent news reports that Digital World Acquisition Corp., which announced plans for a merger with Trump’s company last month, “could have committed securities irregularities by having private and undisclosed merger discussions back in May 2021 without specifying this information. [SEC) filing and other public statements.”

Warren also wrote, “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.”

The SEC did not immediately respond to CNBC’s request for comment.

So-called special purpose acquisition companies such as DWAC are created to raise capital in public equity markets with the goal of purchasing or merging with private firms.

Trump Media & Technology Group last month said it had entered into a merger agreement with DWAC that would end with Trump’s company becoming a publicly listed company, subject to regulatory and stockholder approval.”

Warren’s letter to the SEC cited an Oct. 29 article in The New York Times, which carried the headline, “Trump’s $300 Million SPAC Deal May Have Skirted Securities Laws.”

That article, citing sources, reported that DWAC’s chief Patrick Orlando “had been discussing a deal with Mr. Trump since at least March,” months before shares in that began trading on the Nasdaq in September.

The Times noted that SPACs are not supposed to have mergers planned when at the time of their initial public offerings.

Warren’s letter cited the Securities Act of 1933 bars false statements or failing to state a material fact in the sale of a security.

She said that under that law, “SPACs are required to disclose any direct or indirect conversations with potential target companies, protecting both the early investors and retail investors joining at the initial public offering.”

“But DWAC and Trump Media and Technology Group appear to have brazenly flouted these
rules,” Warren wrote.

“DWAC indicated in numerous SEC filings between May 25, 2021 and September 8, 2021 that the organization stated, ‘[w]e have not chosen any specific purpose of the business combination and
neither we nor anyone on our behalf has initiated any substantive discussion, directly or
indirectly, for any purpose of business combination. ” “

At the same time that the merger was announced, Trump said he would roll out a platform called TRUTH Social, which he argued “stands up to the tyranny of big technology.”

Earlier this year, the former Republican president was blocked by social media giants Twitter and Facebook after being accused of instigating the January 6 Capitol riot by his supporters.

– Additional reporting by CNBC Thomas Frank

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