Members of the board of the blank cheque company Digital World Acquisition Corporation have disclosed that they have received subpoenas issued by a U.S. federal grand jury in the Southern District of New York. Digital World is currently set to merge with Donald Trump’s social media company, Truth Social.
Truth Social was launched in response to Trump being banned from Twitter (he had more than 88 million followers on the platform at the time). He currently has 3.37 million followers on Truth Social. The app’s rollout has been anything but smooth. It has been plagued by delays and technical glitches, and it is still not available to Android mobile users at the time of this writing.
This is just the latest setback for Trump’s plans to take public Trump Media & Technology Group (TMTG), the creator of Truth Social. It remains unclear the level to which Trump is actually involved with TMTG and Truth Social.
Both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are investigating the merger, which was agreed upon last October and was set to close in the second half of 2022.
The merger would provide Truth Social with $1.3 billion in capital as well as a stock market listing. The issuance of the grand jury subpoenas is expected to delay the merger.
The morning after Digital World’s announcement of the subpoenas in a regulatory filing, its shares fell 9%.
One of the issues the SEC is investigating is whether Digital World and TMTG held serious talks before Digital World went public last September and, if so, why it did not disclose this in its regulatory filings.
Digital World is a special purpose acquisition company (SPAC), a blank cheque company set up to go public and subsequently find a company to merge with. However, SPACs are not supposed to have a deal lined up before they go public.
Some of the information requested by the grand jury was about communications with Rocket One Capital, a Miami-based investment firm, which has led to Bruce Garelick, Chief Strategy Officer of Rocket One Capital, resigning from the board of Digital World.