The Securities and Exchange Commission and Department of Justice are Investigating Digital World Acquisition Corp. for Securities Violations
Robbins LLP is investigating whether Digital World Acquisition Corp. (NASDAQ: DWAC) violated securities laws. Digital World is a special purpose acquisition company (SPAC) created to effect a merger of one or more businesses.
On October 29, 2021, The New York Times reported that in attempting to take Trump Media & Technology Group (“TMTG”) public via a merger with Digital World, Donald J. Trump discussed the merger with Digital World’s founder before Digital World itself went public. These discussions may have violated federal securities laws, which prohibit SPACs from planning mergers before conducting their own initial public offerings. On this news, Digital World’s stock fell $6.93 per share, or over 10%, to close at $60.82 per share on November 1, 2021.
Then, on June 13, 2022, Digital World stated in a filing with the U.S. Securities and Exchange Commission that “[a]s previously disclosed in Digital World’s quarterly report on Form 10-Q for the period ended March 31, 2022 and other filings with the SEC, Digital World received a document request and subpoena from the SEC seeking various documents and information regarding, among other things, meetings of Digital World board of directors; communications with and the evaluation of potential targets, including TMTG; communications relating to TMTG; agreements with and payments made to certain advisors; investors, including investor meetings and agreements; the appointment of certain of Digital World’s officers and directors; policies and procedures relating to trading; and documents sufficient to identify banking, telephone, and email addresses. The SEC also recently issued an order of examination pursuant to Section 8(e) of the Securities Act, with respect to the Registration Statement relating to the Business Combination, and a further subpoena in support thereof.” On this news, Digital World’s stock price fell $10.71 per share, or 28.18%, to close at $27.30 per share on June 14, 2022, harming investors.
Finally, Digital World disclosed that on June 16 and 24, 2022, it had received grand jury subpoenas, “which could materially delay, materially impede, or prevent the consummation” of the merger with TMTG. These subpoenas are tied to Digital World’s merger process, due diligence, and financial relationships between its board members and certain outside entities, among other matters.
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