Elizabeth Warren demands an inquiry into Trump's proposed SPAC transaction

Sen. Elizabeth Warren (D-Massachusetts) called on the Securities and Exchange Commission (SEC) to investigate the planned merger between former President Donald Trump's new media and technology firm and a Special Purpose Acquisition Company, or SPAC, on Wednesday.

Warren claimed Trump's corporation "may have committed major securities breaches by conducting secret and confidential negotiations about the merger as early as May 2021," before the agreement was revealed, in a letter to SEC Chairman Gary Gensler.

Trump stated last month that he was developing a new social media network called "Truth Social," as well as that his Trump Media & Technology Group had merged with the SPAC Digital World Acquisition Corp (DWAC). The blank-check business was founded in December.

After Trump announced the merger, trading in the SPAC was momentarily suspended several times. At one time, the stock soared by 130 percent.

According to Warren, SPACs are required to disclose any direct or indirect interaction with possible target firms under the Securities Act of 1933 in order to safeguard investors who join at the time of an initial public offering (IPO).

“But DWAC and Trump Media and Technology Group appear to have brazenly flouted these rules,” Warren wrote. She cited SEC filings from between May 25 and Sept. 8, where the DWAC had said it did not pick any “specific business combination target” or initiate "any substantive discussions, directly or indirectly, with any business combination target.”

However, according to press sources cited by Warren, the SPAC's sponsor, Patrick Orlando, was in talks with Trump about a deal as early as March 2021, far before the SPAC filed its maiden report in May 2021 and launched its IPO in September 2021.

“The reports about DWAC and Trump Media and Technology Group appear to be a textbook example of a SPAC misleading shareholders and the public about materially important information,” Warren wrote in the letter.

Warren said DWAC’s failure to disclose early conversations “had the result of enriching big investors while trapping retail investors in a stock bubble.” She noted that after DWAC said it was merging with Trump’s company at least four institutional investors sold their unrestricted shares.

The Massachusetts Democrat also questioned the lack of a business model of Trump’s company, contending that it “raises questions about the extent to which DWAC may be profiteering off the SPAC model and its inherent disclosure failures.”

She said the media company’s corporate overview does not include any officers, employers or operations, but instead relies on “the brand of former President Trump and aspirational statements about the company’s ability to compete with existing social media giants, the traditional news media, and streaming services, including Netflix and Disney Plus.”

Warren said that if the reports she laid out are correct, "the agency has a responsibility to act.”

She asked Gensler to respond to a series of questions, including whether the Securities and Exchange Commission's Division of Corporation Finance is investigating claims that DWAC failed to disclose conversations with Trump's company, whether the SPAC's failure to disclose conversations with Trump's company is a material omission, and what Trump's company's obligations are.

GAG reached out to the SEC and Trump for comment.


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