Orlando Former Digital World CEO
Indicted on Securities Fraud Charges
Did Not Inform Investors About Backdoor Listing Plans
The parent company operating former U.S. President Donald Trump's social networking service (SNS) 'Truth Social' has been implicated in securities fraud charges.
According to major foreign media including CNBC on the 18th (local time), the U.S. Securities and Exchange Commission (SEC) filed a lawsuit the day before against Patrick Orlando, the former CEO of Digital World Acquisition Corp. (DWAC), in the U.S. District Court for the District of Columbia on charges of securities fraud including false disclosure.
DWAC is a special purpose acquisition company (SPAC) that facilitated the Nasdaq reverse merger of 'Trump Media & Technology Group' (TMTG), the parent company of Truth Social. A SPAC merger allows a company to be listed on the stock market via a backdoor listing without undergoing the complicated initial public offering (IPO) process.
The SEC considers it illegal that Orlando, during his tenure as CEO, was pursuing the acquisition and reverse merger of TMTG but failed to disclose this to investors. In documents submitted to the court, the SEC stated, "Orlando engaged in long personal discussions with Trump Media officials and had TMTG in mind as a merger target for months, yet falsely told investors that there were no plans to merge with any specific target." It added, "Orlando carried out this deceptive scheme not only to gain financial benefits from the merger but also to avoid opposition from the company's directors."
Currently, the SEC has requested the court to recover all ill-gotten gains Orlando earned from the illegal acts, impose civil fines, and issue a permanent injunction to prevent him from engaging in such conduct in the future. Orlando and TMTG declined CNBC's request for comment.
Earlier, DWAC approved the merger with TMTG at a shareholders' meeting on March 22. TMTG also announced on the same day that all legal procedures related to the merger had been completed. TMTG is currently traded on Nasdaq under the ticker symbol 'DJT,' which are the initials of former President Trump. On the first day of listing, the stock price surged nearly 50%.
TMTG is currently regarded as a representative beneficiary stock related to former President Trump's election. On this day, TMTG's stock price closed at $37.38, up 2.58% from the previous session on the New York Stock Exchange. It has risen about 113% since the beginning of the year. After the shooting incident at Trump's campaign event, the stock price soared more than 30% as the possibility of his return to the White House increased.
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