Federal regulators are investigating the Trump SPAC deal

The shell company that is facilitating former President Donald Trump’s return to Wall Street disclosed Monday that federal regulators are investigating the deal. In October, Trump announced a new media venture that would “stand up to the tyranny of Big Tech.” That new entity, chaired by the former president, agreed to go public through a merger with Digital World, a Special Purpose Acquisition Company, or SPAC. In a filing Monday, Digital World Acquisition Corp. said it received a document and information request from the Securities and Exchange Commission in early November. Among other items, Digital World said the SEC request sought documents and communications between Digital World and Trump Media and Technology Group. Digital World also said Wall Street’s self-regulator, the Financial Industry Regulatory Authority, or FINRA, is looking into trading prior to the deal’s announcement. Shares of Digital World skyrocketed as much as 1,657% in the days after the deal was announced. The company achieved meme stock status almost overnight, even though little is known about the venture. Filings did not indicate how much revenue, if any, the firm generates. But almost immediately the deal drew scrutiny. Trump began discussing a merger with Digital World long before the blank-check company went public and before such talks were disclosed to investors, The New York Times reported in late October. Senator Elizabeth Warren called for the SEC to investigate whether any laws were broken by Digital World because the company repeatedly told shareholders that it had not held substantive talks with a target company. SPACs are not supposed to have merger targets planned before they raise money from the public. In a tweet Monday, Warren said she’s “glad” the SEC and FINRA are investigating. “Nobody is above the law – and there may have been serious violations of securities laws during the proposed merger of Digital World Acquisition Corp & Trump’s media company,” Warren wrote. Digital World said Monday the SEC request sought documents relating to meetings of its board of directors, policies and procedures related to trading, the identification of banking, telephone and email addresses and the identities of certain investors. Digital World indicated it has cooperated and stressed, citing the SEC’s request, that the investigation does not mean the SEC has “concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person, event or security.” Neither Digital World nor Trump Media and Technology Group responded to requests for further comment. Digital World’s shares closed down more than 4% Monday. In addition to the SEC investigation, Digital World said that in late October and early November it received a request for information from FINRA. The company said FINRA’s request concerned a review of trading prior to the October 20 Trump merger announcement. “According to FINRA’s request, the inquiry should not be construed as an indication that FINRA has determined that any violations of Nasdaq rules or federal securities laws have occurred, nor as a reflection upon the merits of the securities involved or upon any person who effected transactions in such securities,” Digital World said in the filing. Despite the regulatory scrutiny and the fact that Trump Media & Technology Group has not actually launched a product, the venture announced Saturday it reached a deal to raise $1 billion upon completion of its SPAC agreement. Curiously, TMTG did not disclose who the investors committing $1 billion are, other than to say they are a “diverse group” of institutional investors. Later on Monday, TMTG announced that Republican Rep. Devin Nunes of California will become its CEO next month. Nunes said in a letter to his constituents that he’ll leave the House in the coming weeks.