Buyer of Trump’s Truth Social faces legal issues

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Digital World Acquisitions Corp (DWAC), the special-purpose vehicle set up to buy former President Donald Trump’s Truth Social platform, has announced it is facing subpoenas and related investigations from the US Department of Justice that could delay the deal.

DWAC revealed that each member of its board of directors has been subpoenaed by a Southern District of New York grand jury in a Monday regulatory filing. The grand jury and the Securities and Exchange Commission are both seeking documents involving DWAC, ARC Global Investments, and Rocket One Capital. 

The subpoenas relate to an inquiry opened in November by the SEC, according to DWAC’s filing. The regulator reportedly sought records tied to meetings involving the company’s board of directors, policies and procedures related to trading, and certain investors’ identities.

It has not been disclosed if the subpoenas are related to Democrat Senator Elizabeth Warren’s calls for the SEC to investigate the company over claims its CEO may have failed to tell investors about talks he had with Trump. 

Trump Media and Technology Group, the parent company of Truth Social, which was about to be acquired by DWAC, declared on Monday that it will cooperate with “oversight that supports the SEC’s important mission of protecting retail investors.”

DWAC has been relatively careful in what it promises investors, to the point of potentially scaring them away in a merger document released last month that warned several companies associated with Trump had filed for bankruptcy, and the former president was involved in numerous potentially reputationally-damaging lawsuits. The SEC could still disapprove of DWAC’s acquisition of TMTG, the filing suggested, and a public accounting firm had already expressed “substantial doubt” about the company’s “ability to “continue as a ‘going concern.’” Shares of DWAC plunged 10% at the start of trading on Monday as news of the subpoenas broke.

Nor has the Trump-branded social network itself been free from problems. The app’s rollout earlier this year was seen as glitchy, with a lengthy waiting list as fans impatiently tried to sign up. While Trump is supposedly obligated to post any comments to Truth Social at least six hours before going to any other platform, that clause has a sizable loophole exempting “political messaging, political fundraising, or get-out-the-vote efforts.” While Trump has been banned from the vast majority of social networks, billionaire Elon Musk’s pending takeover of Twitter has led some to believe he will return to that platform, despite his insistence to the contrary.

DWAC has been planning to acquire TMTG for nearly a year, with the deal first floated in October. However, the merger has been plagued by market analysts’ concerns that the company was valued too highly, with Shanghai-backed investment firm Arc Group initially putting the price tag for Trump’s company at $875 million with a “potential additional earnout” of $825 million.

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