{"id":569,"date":"2024-02-04T00:05:08","date_gmt":"2024-02-04T00:05:08","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/04\/the-wild-probe-into-investors-of-dwac-trump-medias-proposed-merger-ally\/"},"modified":"2024-02-04T00:05:08","modified_gmt":"2024-02-04T00:05:08","slug":"the-wild-probe-into-investors-of-dwac-trump-medias-proposed-merger-ally","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/04\/the-wild-probe-into-investors-of-dwac-trump-medias-proposed-merger-ally\/","title":{"rendered":"The wild probe into investors of DWAC, Trump Media\u2019s proposed merger ally"},"content":{"rendered":"
\n

In October 2021, former president Donald Trump announced that his media company, the owner of the platform Truth Social, had sealed an incredible deal: a merger with a \u201cspecial purpose acquisition company\u201d that would deliver to his firm $300 million toward his promise of giving \u201ca voice to all.\u201d<\/p>\n

By then, however, the insider trading by investors in the SPAC, Digital World Acquisition, had already begun, according to documents filed recently in the criminal case against three Digital World investors who\u2019ve been charged with securities fraud in New York federal court.<\/p>\n

Digital World\u2019s chief executive, Patrick Orlando, a Miami financier Trump had hosted at his golf clubs, had been telling investors privately for months that he\u2019d been talking with Trump about the deal, the filings assert \u2014 a violation of federal securities law, the Securities and Exchange Commission would say later, given his company\u2019s pledge in regulatory filings that its leaders had held no talks with any merger targets.<\/p>\n

One investor, the Miami Beach businessman Anton Postolnikov, had amassed a huge stake in Digital World. Postolnikov, who was born in Russia and is the nephew of a longtime Russian government official, sold most of his stake just days after Trump\u2019s announcement sent the stock soaring, according to an FBI agent\u2019s search warrant affidavit. His profit: $22 million.<\/p>\n

Another, a Ukraine-born nightclub manager turned private equity investor named Michael Shvartsman, told his business partners and a neighbor about the moneymaking opportunity, according to the affidavit \u2014 before securing $18 million in profits for himself.<\/p>\n

Those profits caught the attention of federal officials who launched a sprawling investigation into Digital World\u2019s investors, the details of which raise questions about how Trump, who built his political reputation in part on having mastered \u201cthe art of the deal,\u201d ended up committed to a business arrangement that federal agents now allege was undermined from its inception by financial fraud.<\/p>\n

Trump and Trump Media have not been accused of wrongdoing in the case. But Trump Media has been blocked from accessing the $300 million it expected to receive through the merger \u2014 money that it could use to build out Truth Social, Trump\u2019s main online megaphone, ahead of the November election.<\/p>\n

Rejected by banks and lenders over the Jan. 6, 2021, insurrection and his long history of bankruptcies and business failures, Trump had approved the merger of his company with a special purpose acquisition company as a way to raise money in the months after he lost the White House. Often called \u201cblank check\u201d firms, SPACs promise access to public stock investors with fewer financial disclosures than a traditional corporate listing requires.<\/p>\n

Trump allies have claimed that the SEC\u2019s delay in approving the merger proves he\u2019s being persecuted by the Biden administration. But the cache of investigative documents, submitted as part of the pretrial discovery process ahead of a spring trial of those already charged, shows the investigation went far beyond the SEC.<\/p>\n

The documents detail the involvement of agents and investigators from the FBI, the SEC and Homeland Security Investigations, which is the division of the Department of Homeland Security dedicated to rooting out cross-border criminal activity and which includes one of the government\u2019s most elite anti-money-laundering teams. The documents suggest the investigation is ongoing.<\/p>\n

Investigators used a microphone-wearing undercover informant to secretly record Shvartsman\u2019s attempts to move the profits \u2014 assets he told the informant he\u2019d gained from the \u201cs\u2014 [that] happened with Trump\u201d \u2014 into a web of offshore accounts. The documents also claim Shvartsman offered to introduce the informant to an unnamed official in Ukraine who needed help moving a \u201csignificant amount of money.\u201d Whether officials pursued that tip is unknown.<\/p>\n

The documents also reveal that FBI agents secretly tracked the holiday travel to Mexico of a Digital World board member so he could be intercepted on his return to John F. Kennedy International Airport in New York, where Customs and Border Protection officers commandeered his iPhone. While the board member waited for its return, the documents state, FBI agents covertly copied the phone\u2019s contents.<\/p>\n

The hundreds of pages of documents include a previously sealed indictment, HSI reports detailing undercover operations, emails, text messages, transcripts of recorded conversations, prosecutors\u2019 memos summarizing evidence, and affidavits supporting search and seizure warrants for phones, digital data and bank accounts.<\/p>\n

At a hearing in July, Nicolas Roos, an assistant U.S. attorney for the Southern District of New York who has led some of his office\u2019s highest-profile cases, including the prosecutions of former Trump attorney Michael Cohen and cryptocurrency mogul Sam Bankman-Fried, said prosecutors were in possession of roughly 2.5 million emails and other documents, as well as copies of several seized cellphones.<\/p>\n

Trump\u2019s campaign referred comment for this story to Trump Media. Jesse Binnall, an attorney for Trump Media, said in a statement that the alleged wrongdoing \u201chad no connection to Trump Media whatsoever.\u201d Noting that Trump Media is suing The Washington Post over a previous story about the merger plans, Binnall warned that \u201cany allegations against Trump Media are maliciously and transparently false.\u201d He did not identify any specific reporting that he alleged to be false.<\/p>\n

Shvartsman, his brother Gerald, and Bruce Garelick, the investment chief of Shvartsman\u2019s private-equity firm Rocket One Capital, have been charged with conspiracy and securities fraud in the case.<\/p>\n

Tai Park, an attorney for Shvartsman, said in a statement to The Post: \u201cAny suggestion of wrongdoing is flatly denied. He has [pleaded] not guilty and looks forward to the trial where we expect he will be vindicated.\u201d In a December court filing, Park said prosecutors had indicated new money-laundering charges could still be filed. Attorneys for Gerald Shvartsman and Garelick did not respond to requests for comment.<\/p>\n

The SEC and Department of Homeland Security, which oversees HSI, declined to comment. The FBI referred comment to the U.S. attorney\u2019s office, which also declined to comment.<\/p>\n

Postolnikov, Orlando, Digital World and Rocket One did not respond to requests for comment. Neither Postolnikov nor Orlando, who was terminated as Digital World\u2019s chief as the probe unfolded, has been charged.<\/p>\n

In July, Digital World said it would pay $18 million if the merger goes through to settle SEC charges that it had misled investors and violated rules designed to counter fraud. Digital World said last month in an SEC filing that investigations by the SEC and Justice Department could \u201cdelay, materially impede, or prevent\u201d the merger.<\/p>\n

The biggest financial losers from the insider-trading scheme, however, probably were early Digital World investors who believed in Trump\u2019s company enough to buy up shares in the hours after he announced the merger deal. In the days when the insiders were cashing out, Digital World\u2019s share price peaked at $175. Shares closed Friday at $40.60.<\/p>\n

In June 2021, the court filings say, Orlando went to meet with Shvartsman and other prospective investors at the Miami-area offices of Rocket One, a little-known private equity firm that had marketed itself on LinkedIn as investing in \u201cfearless entrepreneurs.\u201d<\/p>\n

Shvartsman had helped run a nightclub in the 1990s in Edmonton, Alberta, called Kaos that local police alleged was financed by the Russian mob, a 2022 Financial Times report said \u2014 a claim Shvartsman denied, and for which he was never charged. He also founded Transact First, a company whose \u201ccashless ATMs\u201d help marijuana dispensaries transfer money from banks that would otherwise reject them as customers under federal law, according to a Bloomberg News report in 2022, which called him the \u201cgranddaddy\u201d of the \u201cmajor cashless ATM players.\u201d<\/p>\n

The meeting came one month after Orlando had signed a registration statement filed with the SEC saying Digital World had not \u201cinitiated any substantive discussions, directly or indirectly, with any business combination target.\u201d<\/p>\n

But messages included in an FBI affidavit indicate that Trump\u2019s company was part of the conversation in the meeting. In an email shortly afterward, Garelick wrote that he and Shvartsman had talked with Orlando about the \u201cfuture payment processing needs for the Trump Media Group.\u201d<\/p>\n

One executive at Rocket One, Allen Beyer, told the firm\u2019s leaders after the meeting that he was underwhelmed, writing in a text message that Trump\u2019s last online venture, a blog, \u201cwas an embarrassment\u201d and that the idea of an app just for \u201cForever Trumpers\u201d would \u201cbe a bust,\u201d the affidavit said. \u201cWould you ever be associated with this as a \u2018founder\u2019 or anything in case it goes up in literal flames?\u201d Beyer wrote. He did not respond to requests for comment.<\/p>\n

Garelick replied, however, that the investment came with \u201cdownside protection,\u201d the affidavit said. Garelick, Shvartsman and his brother, Gerald, who ran an outdoor-furniture store, invested enough to guarantee Garelick a seat on Digital World\u2019s board, the indictment said.<\/p>\n

The three men had signed confidentiality agreements before the meeting saying they would not trade on the inside information. But over the next few months, they bought up hundreds of thousands of dollars of Digital World shares and trading contracts, known as warrants, for small fractions of the price the shares would command once the deal was publicly disclosed.<\/p>\n

The men also spoke with Postolnikov, another Miami-area entrepreneur who, like Shvartsman, was involved in the business of international payments. According to British financial records, Postolnikov owns a bank headquartered on the small Caribbean island of Dominica, called Paxum, that promotes itself as a financial conduit for online adult entertainment \u2014 an industry, like marijuana dispensaries, that banks traditionally have chosen to avoid.<\/p>\n

Born in St. Petersburg, Postolnikov had in 2017 faced an arrest warrant in his hometown on charges of tax fraud, according to a court ruling obtained by The Post. That warrant, the ruling shows, was lifted in 2018, following the direct intervention of Russia\u2019s deputy prosecutor general, who said the case was without merit.<\/p>\n

By 2021, Postolnikov, whose uncle, Aleksandr Smirnov, had served for most of the last two decades as a senior member of the Russian government, was saying in online profiles he lived in Miami Beach. In March 2021, he donated $30,000 to Florida Gov. Ron DeSantis\u2019s reelection campaign, campaign finance records show. A month later, according to Miami-Dade property records, a company he owns bought a $6 million condo on Fisher Island, a private island near Miami Beach once named \u201cAmerica\u2019s richest Zip code.\u201d<\/p>\n

In June 2021, after the meeting with Orlando, Garelick wrote Postolnikov an email referring to some \u201cgood times last night,\u201d without details, and asked about his interest in investing in \u201cthat Trump Media Group SPAC we mentioned,\u201d the affidavit alleges.<\/p>\n

When Digital World announced its initial public offering in September 2021, it made no mention of Trump and said only that it intended to focus on \u201cmiddle market and emerging growth technology-focused companies in the Americas.\u201d But a day later, Postolnikov started buying hundreds of thousands of stock units and warrants in Digital World via a company called APLC Investments, a search warrant affidavit alleges.<\/p>\n

During that time, he also spoke on the phone \u201cregularly\u201d with Orlando and Gerald Shvartsman, according to an FBI agent\u2019s affidavit in support of a search warrant seeking emails and other data from their Apple and Google accounts.<\/p>\n

Within hours of the Oct. 20, 2021, merger deal announcement, the price of Digital World\u2019s shares and warrants exploded. Shares first listed at $10 sold for prices as high as $175. And within days, the indictment said, all of the men had sold their shares for major profits, including $4.6 million for Gerald Shvartsman and $50,000 for Garelick.<\/p>\n

The men celebrated with a few others they\u2019d told about the \u201cgood bet,\u201d including a neighbor, a friend and an employee, the records show. After his furniture store employee and the employee\u2019s father made $2 million in profits within two days of Trump Media\u2019s announcement, Gerald Shvartsman sent the employee a text message: \u201cI\u2019m happy for you. I\u2019ll be waiting for my commission,\u201d the records show.<\/p>\n

But all stock market trades are monitored, and the frenzy of activity in an otherwise unremarkable SPAC just before its big kickoff attracted federal attention. By the end of October, a Digital World filing shows, the Financial Industry Regulatory Authority, an internal watchdog for the securities industry known as Finra, had started asking about the trades.<\/p>\n

On the night of Dec. 31, 2021, Garelick had just landed at Kennedy Airport in New York after a vacation with his girlfriend to Canc\u00fan and Tulum when a customs agent told him he had been flagged for a secondary screening, according to a CBP inspection report filed in court.<\/p>\n

In a backroom, two CBP officers began asking about his work with Digital World, saying they\u2019d looked him up online and thought he had an \u201cimpressive background,\u201d Garelick said in a court statement filed late last year. They also asked for his iPhone 11 Pro Max, plus the password to unlock it, assuring him it was all routine, he said.<\/p>\n

What Garelick didn\u2019t know is that two days earlier, a magistrate judge in Brooklyn had signed a warrant allowing FBI agents to search Garelick\u2019s phone and not tell anyone about it, a copy of the judge\u2019s ruling shows. While Garelick was waiting, an FBI agent took photos of his phone\u2019s text messages and a forensic examiner raced to make a full copy of its contents, a prosecutor\u2019s memo says.<\/p>\n

Around 9:30 p.m., after the inspection had gone on for an hour and 14 minutes, the agents ended the phone-data extraction early so as not to alert Garelick that he was under criminal investigation, the memo said. The border agents gave Garelick his phone back, and he went on his way.<\/p>\n

The investigators weren\u2019t finished, however. In a search warrant affidavit, FBI agents said they were on the hunt for any information related to the relationships between Orlando, Postolnikov, the Shvartsman brothers and others who traded in Digital World stock.<\/p>\n

They weren\u2019t the only ones interested in the case. SEC officials had one month earlier started asking Digital World about its investors\u2019 identities and its communications with Trump Media, an SEC filing shows. And a team of Miami agents specializing in illicit proceeds and foreign corruption inside HSI\u2019s El Dorado Task Force, which tracks financial crime, launched a joint effort alongside the FBI and SEC \u2014 code-named \u201cTrust Social\u201d \u2014 once they\u2019d realized they were pursuing \u201cthe same investigative targets,\u201d HSI said in a July 2023 report documenting the indictments filed in court.<\/p>\n

In December 2021, more than $16 million had been moved from a Rocket One brokerage account into two OptimumBank accounts in Shvartsman\u2019s name, the indictment said. From there, the money was shuttled into a \u201cwash account\u201d that Shvartsman\u2019s company Transact First had used to transfer millions of dollars in a single day, an HSI agent said in an affidavit for a bank-account-seizure warrant later signed by a judge.<\/p>\n

The account\u2019s \u201csheer volume of high-dollar transactions\u201d made it a \u201cconvenient tool to conceal the proceeds of illegal activity,\u201d according to the affidavit. Over the next several months, it alleged, millions of dollars filtered from that account into another bank account in Shvartsman\u2019s name.<\/p>\n

Trump Media later received a $2 million promissory note from a lender called ES Family Trust, Digital World said in an SEC filing last year. According to media reports, the trust\u2019s only named trustee, Angel Pacheco, says on LinkedIn he is also a director at Paxum, Postolnikov\u2019s bank.<\/p>\n

Pacheco, who a Florida business record says is a co-manager with Shvartsman of a Miami company called Foundation Card Services, did not respond to requests for comment. The owner of an email address for the trust has not responded to questions about where the money came from.<\/p>\n

One afternoon in December 2022, Shvartsman met with a specialist at a Marriott hotel near Miami International Airport to discuss what his lawyer would later describe in a court declaration as his \u201cinterest in asset protection.\u201d<\/p>\n

Shvartsman told the man he needed help, due to the \u201crecent Russian related sanctions,\u201d in moving some of his assets \u2014 which included \u201csome real estate, a small amount of cash (described as \u2018a few million bucks\u2019) and a yacht\u201d \u2014 into a company he intended to create in Belize, according to an HSI investigative report in the \u201cTrust Social\u201d case filed with the court.<\/p>\n

The specialist, though, was actually a government informant wearing a hidden microphone, according to HSI investigative reports, which refer to him only as \u201cSA-2894-MI.\u201d And after Shvartsman asked for his assistance in setting up new bank accounts, perhaps in Switzerland or Western Europe, the informant told Shvartsman he would be happy to help \u2014 in exchange for a fee \u201cabove the typical rate.\u201d<\/p>\n

Over the next several months, the informant and Shvartsman met regularly to hash out a plan for how the informant could shuttle Shvartsman\u2019s assets around the globe, according to the government\u2019s transcripts of the conversations filed in court. The records do not detail how the informant was introduced to Shvartsman or where he lived, though he signed off after one call saying he was in \u201cBritish Summer Time.\u201d<\/p>\n

The secretly recorded meetings featured moments of tension. During one March 2023 meeting inside a Rocket One office north of Miami, Shvartsman signed documents to move his assets into an offshore trust and then warned he would \u201chave to kill\u201d the informant if the man tampered with Shvartsman\u2019s fortune, according to the government\u2019s transcript of the meeting.<\/p>\n

When the informant told another man in the room, \u201cThat\u2019s the second time he said he\u2019s going to kill me,\u201d Shvartsman responded, \u201cI don\u2019t f\u2014 around,\u201d the transcript states.<\/p>\n

But the conversations also showed the men getting to know each other. During the March meeting, Shvartsman said the main reason he wanted to move his assets was \u201cthe ordeal with \u2018Trump\u2019\u201d and his \u201cdesire to not have the funds acquired from that investment taken from him,\u201d according to a \u201cdebriefing\u201d statement from the informant included in the HSI report filed with the court. Shvartsman\u2019s attorney also told the informant then that his client was \u201cyour classic serial entrepreneur\u201d and had a \u201cfetish for superyachts,\u201d according to the government\u2019s transcript.<\/p>\n

During the meetings, Shvartsman offered to introduce the informant to new clients, saying he knew a Russian-speaking \u201chigh-ranking Army or military officer\u201d in Ukraine who needed help moving a \u201csignificant amount of money,\u201d according to a transcript detailing what the informant told agents after one April 2023 lunch. \u201cThere\u2019s guys in the Ukraine sitting on a lot of cash,\u201d Shvartsman told the informant in another meeting, according to the government\u2019s transcript.<\/p>\n

But he also extended to the informant his own connections, saying he had a Russian friend who lived on Fisher Island and owned a bank in Dominica that could provide banking services to Russian, Chinese or Ukrainian individuals facing \u201csanction issues\u201d or other financial restrictions, the government\u2019s transcript shows.<\/p>\n

\u201cWe do a lot of business together. He\u2019s a very good friend of mine,\u201d Shvartsman said, according to the transcript. In the version of the HSI report filed in court, the friend\u2019s name is redacted.<\/p>\n

One morning in June 2023, four FBI agents, two HSI agents and officers from the local police showed up at Shvartsman\u2019s home in the Miami suburb of Sunny Isles Beach with a warrant for his arrest. Two other arrest teams nabbed his brother and Garelick at their homes in nearby Aventura and Fort Lauderdale, a Justice Department filing said.<\/p>\n

In the HSI report from July documenting the arrests, agents said all three men had \u201cties to Ukraine and Russian Politically Exposed Persons (PEPs),\u201d a term for prominent officials believed to be vulnerable to bribery or corruption. A Justice Department statement said the men faced up to seven counts of conspiracy and securities fraud, with maximum sentences of 90 to 130 years in prison.<\/p>\n

But Shvartsman\u2019s talks with the informant didn\u2019t stop.<\/p>\n

In July 2023, a week after he pleaded not guilty in a New York courtroom, he met with the informant to ask about the status of his asset transfers, the government\u2019s transcript of their meeting shows. The informant assured him that his assets were in the process of moving from Hong Kong to the United Kingdom and then to Belize, according to the transcript \u2014 \u201cthe full Singapore with a double dip, as we call it, with having the U.K. thrown in there, just to give it that added cleanliness and polishing off,\u201d he said.<\/p>\n

The men also discussed whom Shvartsman wanted to nominate as the ostensible leaders of the local shell companies \u2014 \u201cno Russians,\u201d the informant confirmed \u2014 and proposed a crew that, at one point, included \u201ctwo Ukrainians, a Canadian and a Bulgarian,\u201d the transcript states. The assets\u2019 spin through Hong Kong, the informant said, would ensure they stayed \u201cout of reach of the U.S. government because, you know, it\u2019s China, basically,\u201d according to the transcript. \u201cThat is the big washing machine.\u201d<\/p>\n

In August, Shvartsman and the informant went to Carpaccio, a restaurant in the wealthy Miami Beach enclave of Bal Harbour, for what was perhaps their last secretly recorded lunch, according to the government\u2019s transcript of the meeting.<\/p>\n

Shvartsman pushed for details on the \u201cfull Singapore\u201d process and a Swiss bank account. And the men agreed on a system of code words that Shvartsman could use, once the money was sheltered, to secretly send messages to the informant\u2019s operatives over the phone: a \u201cgreen\u201d code to approve a transaction, and a \u201cred\u201d code if Shvartsman was facing an emergency or under investigative duress.<\/p>\n

The \u201cgreen\u201d phrase was \u201cHow\u2019s your girlfriend, Alexandra?\u201d a transcript shows. Asked for a \u201cred\u201d phrase, Shvartsman responded, \u201cAnything else.\u201d<\/p>\n

In November, a magistrate judge signed a warrant authorizing the seizure of Shvartsman\u2019s bank account. A federal agent said the account contained roughly $15 million, though bank records cited in the seizure-warrant affidavit said it had reached as high as $44 million the month before.<\/p>\n

Catherine Belton contributed to this report.<\/p>\n<\/p>\n

This post appeared first on The Washington Post<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

In October 2021, former president Donald Trump announced that his media company, the owner of the platform Truth Social, had sealed an incredible deal: a merger with a \u201cspecial purpose acquisition company\u201d that would deliver to his firm $300 million toward his promise of giving \u201ca voice to all.\u201d By then, however, the insider trading […]<\/p>\n","protected":false},"author":0,"featured_media":570,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-569","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/569","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=569"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/569\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/570"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=569"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=569"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=569"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}