Trump Social Network Attracts SEC Inquiry

Regulators are investigating how the former president's new media company was financed.
LANGLEY, VA - JANUARY 21: US President Donald Trump speaks at the CIA headquarters on January 21, 2017 in Langley, Virginia . Trump spoke with about 300 people in his first official visit with a government agaency. ... LANGLEY, VA - JANUARY 21: US President Donald Trump speaks at the CIA headquarters on January 21, 2017 in Langley, Virginia . Trump spoke with about 300 people in his first official visit with a government agaency. (Photo by Olivier Doulier - Pool/Getty Images) MORE LESS

Former President Trump’s social media venture faces investigations into its fundraising from federal regulators, the company disclosed on Monday.

In a Dec. 4 regulatory filing with the Securities and Exchange Commission, Digital World Acquisition Corp. said that the SEC had sent it voluntary requests over the past month for information and records.

The investigation does not indicate that the regulatory body has concluded that people involved with Digital World violated any laws or regulations, the filing noted. Digital World said that it’s cooperating.

Digital World is the main financing vehicle for Trump’s social network, known as TRUTH Social, having raised nearly $300 million in funding. Digital World announced on Oct. 20 that it would merge with Trump Media and Technology Group, which the former president chairs. The merger means that the shareholders of Digital World would come to own stakes in TRUTH Social.

But the company has been plagued by a series of quintessentially Trumpian problems. TRUTH Social, TPM reported, initially violated the terms of the code on which it built its platform. The code’s creator sent TRUTH a letter in October demanding that it comply with the terms of the open-source license.

The New York Times released an article last month raising questions about whether the $300 million deal to fund the network took an end run around federal securities law.

Digital World is a special purpose acquisition vehicle — a SPAC, publicly listed, blank-check firms that lack assets of their own at the time of their public offering but which exist to acquire private firms.

Publicly traded firms have to disclose detailed information about themselves to investors — including the potential presence of federal investigations.

If it strikes you that this may create an opening for private companies to essentially go public without the kind of vivisection that normally occurs during an initial public offering, then you’re not alone: SPACs are barred from having a specific merger planned at the time of their IPO.

In Trump’s case, the New York Times reported, he held talks with the head of the SPAC before it went public —- a potential violation of these rules.

The SEC sent a “voluntary information and document request” in November 2021, according to the filing.

Federal regulators asked for “certain documents and communications between” Digital World and Trump’s company, as well as records relating to the company’s trading policies, its board of directors, and “the identities of certain investors,” it said.

FINRA, the financial industry’s self-regulatory body, has also sent information request to the company, according to the filing.

Per the SEC filing, FINRA is conducting “a review of trading” of Digital World that took place before the merger agreement was announced on Oct. 20. Digital World went public in September 2021. FINRA sent requests to Digital World starting in late October.

The announcement comes one day after the two companies announced a $1 billion financing deal.

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