Blank-check company Digital World Acquisition Corp (DWAC) said it has reached an agreement in principle with the Securities and Exchange Commission (SEC) regarding the investigation into its merger deal with Trump Media & Technology Group (TMTG), the owner of Truth Social.
Under the proposed settlement, if DWAC amends its IPO filings, it will be required to pay an $18 million civil penalty to the SEC after the merger deal's closing. However, TMTG is not a party to the settlement and has not consented to it. The SEC filing suggests that TMTG may disagree and attempt to terminate the Merger Agreement.
If approved, the SEC will issue a cease-and-desist order to DWAC, finding that the company violated "antifraud provisions" pertain to certain statements, agreements, and omissions regarding the timing and discussions DWAC had with TMTG related to its initial public offering filings.
The terms of the agreement are not yet definitive and are subject to SEC approval, according to reports.
The merger deal between DWAC and TMTG, which was intended to bring the media group of former President Donald Trump public through a Special Purpose Acquisition Corporation (SPAC), has faced scrutiny from regulators and prosecutors.
DWAC stated in the filing that the settlement in principle is in the best interest of its shareholders and would avoid protracted litigation with the SEC. The company reiterated its willingness to proceed with the transaction to create an alternative media platform and deliver value to its shareholders.
Last week, federal prosecutors arrested three investors on insider trading charges related to the DWAC-TMTG merger. Allegedly, these investors illegally traded on nonpublic information, making over $22 million in profits in October 2021.
Contact Angela at angela@proactiveinvestors.com
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