Former President Donald Trump’s new media company finds itself under scrutiny by the Securities and Exchange Commission (SEC) after the regulator announced it opened an investigation into the Special Purpose Acquisition Company (SPAC) set to take the Trump venture public. Is.

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Digital World Acquisition Corporation (DWAC), SPAC, facing scrutiny 20 in trade by the SEC as well as the Financial Industry Regulatory Authority (FINRA) ahead of an October 20 announcement that DWAC and Trump Media & Technology Group (TMTG) would merge.

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Upon the announcement of the deal, several media entities, including wall street journal, reported that Trump met with DWAC executive Patrick Orlando before the company raised funds. If this meeting represents a deal between two entities, the companies may be in violation of an SEC rule that prevents SPACs from holding the target company when they initially raise money.

“Notably, in late October and early November 2021, DWAC received a request for information from events around FINRA, [specifically, a review of trading] which was prior to the public announcement of the merger agreement of October 20, 2021,” the filing read. “Per FINRA’s request, the investigation should not be construed as an indication that FINRA has determined that Nasdaq regulations or federal securities laws are not applicable.” any violation has occurred. ,

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The SEC likewise endorsed that this request should not indicate wrongdoing but should represent an investigation into any possible violations that may have occurred as a result of preliminary meetings.

The investigation follows a letter sent by Senator Elizabeth Warren to SEC Chair Gary Gensler asking the commission to launch an investigation into the Trump SPAC. The former Democratic presidential candidate asked that the SEC look into any “securities breaches” by holding private and unannounced discussions about the merger in early May 2021.

After the announcement of the merger, Value of DWAC The stock rose from nearly $10 to a high of $175. Warren called the reports of the meetings a “textbook example” of SPAC misleading investors, which ultimately resulted in “enriching big investors”. After the announcement of the merger, at least four The hedge fund sold its shares in the DWAC.

“DWAC’s failure to disclose these negotiations during this process appears to be a omission of material information required by both initial institutional investors and retail investors in SPAC’s public offering,” Warren wrote. “This lapse was the result of the large investors enriching themselves while trapping retail investors in a stock bubble.”