Legal drama surrounding Donald Trump continues, not just in the high-profile hush-money trial but also in a lesser-known federal case involving a company associated with the former president.
The case sheds light on the financial frenzy sparked by Trump’s association with a particular stock about three years ago, a frenzy that has yet to wane.
Trump Media & Technology Group, the owner of Truth Social, a social-media platform, began trading under the ticker symbol DJT in late March. The stock, DJT, has been volatile, experiencing a surge of over 150% in value this year alone.
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However, the stock faced a setback when the Securities and Exchange Commission (SEC) announced charges against the company’s auditor, causing a 4% drop in its value. While the company and its owner agreed to pay penalties to settle the charges, Trump Media announced it would seek a new auditor.
The federal case, filed in June 2023, alleges insider trading by a former director of Digital World Acquisition Corp., the blank-check company that took Trump Media public. Bruce Garelick, the former director, who left the position before the merger was completed, has pleaded not guilty to the charges. The trial is ongoing, with Garelick reserving the right to testify in his defense.
Barron’s visited the federal courthouse in lower Manhattan to observe part of the insider-trading case. In contrast to the media frenzy surrounding Trump’s hush-money trial, the atmosphere in the federal court was notably calmer.
Neither Trump Media nor the former president are implicated in the federal case. Trump Media declined to comment on the federal proceedings.
Testimony in the insider-trading case revealed the significant influence of Trump’s name on investors. Text exchanges presented in court showed the magnetic pull of Trump’s name on investors. One investor wrote, “This thing will pump again for sure. It’s F’ing Trump.”
Netanel Suissa, who took the stand, testified about his investment after receiving a tip from his boss about a stock merging with “some Trump company.” Suissa invested $13,000, doubling his money when the merger was announced. His boss pleaded guilty to securities fraud for providing insider information.
The movement of DJT shares has implications beyond the courtroom. Trump was recently granted tens of millions of new shares in the company due to its stock price surpassing certain benchmarks. His shares are now worth billions, providing financial support for his presidential campaign and legal defense.
However, Trump cannot sell his shares until mid-September due to an agreement that locks up insiders’ shares for six months after the completion of the merger. This lockup has made the company’s stock-price swings a nerve-wracking experience for early investors.
Eric Swider, former CEO of the blank-check company and current board member of Trump Media, testified that he had made no profit from his involvement in the company thus far. However, he did accidentally make a profit of 17 cents by selling one share he had purchased in 2021.
The trial highlights the financial power Trump’s name holds and the impact it has on investors, as well as the legal challenges and restrictions faced by those associated with Trump and his business ventures.
