NEW YORK (AP) — Two Florida brothers pleaded guilty Wednesday to insider trading charges, admitting making over $22 million illegally before the public announcement in 2021 that an acquisition firm was taking former President Donald Trump’s media company public.
Michael and Gerald Shvartsman entered their pleas to a single count of securities fraud in Manhattan federal court, where Judge Lewis J. Liman set sentencing for July 17.
The men said that they knew they were committing a crime when they made trades in October 2021 through a New York broker.
“I've made a terrible mistake,” Gerald Shvartsman told the judge as he pleaded guilty. He added that it was “wrong and the mistake I will pay for dearly the rest of my life.”
His brother told the judge that he knew that his securities trades were wrong and illegal.
The indictment against them did not in any way implicate Trump — who is again seeking the presidency this year — or Trump Media & Technology Group, which owns his Truth Social platform and began trading on the Nasdaq stock market on March 26. Trump has a 60% stake in the company.
According to the indictment, the men invested millions of dollars in the securities of the special purpose acquisition company Digital World Acquisition Corp. after they were tipped off that a potential target of DWAC and another acquisition company, Benessere Capital Acquisition Corp., was Trump Media.
Authorities said the defendants sold their securities for $22 million in profits once the news about the Trump Media business was made public.
At the time, Michael Shvartsman owned Rocket One Capital LLC, a venture capital firm, according to court papers.
According to court papers, the men shared their secrets with friends and employees, who also bought tens of thousands of units of securities ahead of the merger announcement with Trump Media & Technology Group. Typically, a special purpose acquisition company is formed with the intent to merge with a private company.
The merger and public trading of Trump Media & Technology Group was eagerly anticipated by Trump's political supporters, who viewed the Truth Social platform as a worthy response to Trump's temporary ejection from some social media platforms after the Jan. 6, 2021, insurrection at the U.S. Capitol.
Michael Shvartsman, 53, of Sunny Isles Beach, Florida, and his brother Gerald Shvartsman, 46, of Aventura, Florida, remain free on bail while they await their sentencings. They were both arrested last June.
Federal sentencing guidelines in plea letters signed by the men recommended that Michael Shvartsman receive about four years in prison and his brother spend at least three years behind bars. The deals also call for Michael Schvartsman to forfeit $18.2 million in profits and for his brother to relinquish $4.6 million.
In a release, U.S. Attorney Damian Williams said: "Insider trading is cheating, plain and simple, and today’s convictions should remind anyone who may be tempted to corrupt the integrity of the stock market that it will earn them a ticket to prison.”