WASHINGTON (Reuters) -The U.S. Securities and Change Fee mentioned on Thursday that Digital World Acquisition Company, a particular function acquisition firm that plans to merge with the father or mother firm of Donald Trump’s Reality Social platform, settled expenses that it made “materials misrepresentations” to buyers.
DWAC, which was discovered to have violated antifraud provisions of federal securities legal guidelines, agreed to a cease-and-desist order and to pay an $18 million penalty within the occasion it closes a merger transaction, the SEC mentioned.
The SEC mentioned DWAC misled buyers by failing to reveal in filings that it had formulated a plan to amass Trump Media & Expertise Group Corp and was pursuing the acquisition earlier than DWAC’s IPO.
DWAC didn’t instantly reply to an emailed request for remark.
SPACs are listed shell firms that elevate money to amass and take public a non-public firm, permitting targets to sidestep the stricter regulatory checks of an preliminary public providing.
The SEC cracked down on SPACs after a frenzy of offers in 2020 and early 2021 sparked issues that some buyers had been getting a uncooked deal. In 2022 the company proposed new SPAC rules to spice up disclosures and rein in lofty income projections.
Gurbir Grewal, director of the SEC’s division of enforcement, mentioned DWAC didn’t disclose the merger discussions it had with Trump Media & Expertise Group and “a cloth battle of curiosity of its CEO and chairman.”
Trump Media & Expertise Group in October 2021 introduced a deal to go public by merging with DWAC. It stays unsure.
If it closes, Trump Media would acquire entry to greater than $1 billion in money from Digital World’s institutional buyers, comparable to hedge funds. In keeping with a Feb. 2, 2021 companies settlement, Trump controls 90% of Trump Media.
(Reporting by Jasper Ward; further reporting by Michelle Worth; enhancing by Cynthia Osterman and Stephen Coates)