Feds investigating Trump’s social media startup deal, business partners say

Business partners of former President Donald Trump’s social media startup revealed Monday that the Biden administration is investigating their business, according to regulatory filings submitted to the U.S. Securities and Exchange Commission. 

The SEC and the Financial Industry Regulatory Authority (FINRA) each have requested information from Digital World Acquisition Corp. (DWAC), a special purpose acquisition company that has a merger agreement with Trump Media & Technology Group. 

Trump Media & Technology Group is responsible for the development of Mr. Trump’s intended new social platform TRUTH Social. 

DWAC said in the filings that it received “certain preliminary, fact-finding inquiries” from the FINRA and the SEC and that it was cooperating with the regulators. 

According to DWAC, the FINRA requested information preceding its merger agreement with Mr. Trump’s team. The SEC wanted information on policies and procedures related to trading, identification information, and communications between DWAC and Trump Media & Technology Group. 

“According to the SEC’s request, the investigation does not mean that 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,” read the filing submitted by DWAC. 

The SEC said it does not comment on the existence or nonexistence of a possible investigation and the Trump Media & Technology Group did not immediately respond to request for comment. 

Previously, Sen. Elizabeth Warren urged the SEC in a Nov. 17 letter to investigate the merger agreement between Mr. Trump’s team and DWAC. Ms. Warren began her own investigation into special purpose acquisition companies like DWAC in September and wrote to SEC chair Gary Gensler in November requesting an investigation into the deal with Mr. Trump’s group. 

DWAC’s regulatory filings indicate the Biden administration’s investigations may have begun before Ms. Warren’s November letter pressuring the SEC to probe Mr. Trump’s team. 

The filings said the SEC’s request for information was made in “early November 2021” and FINRA’s inquiries were made “in late October and in early November 2021.” 

On Friday, Trump Media & Technology Group and DWAC said they had agreements for $1 billion in capital from a “diverse group of institutional investors” who were not named. 

“$1 billion sends an important message to Big Tech that censorship and political discrimination must end,” Mr. Trump said Friday in a statement as Trump Media & Technology Group chairman. “America is ready for TRUTH Social, a platform that will not discriminate on the basis of political ideology. As our balance sheet expands, TMTG will be in a stronger position to fight back against the tyranny of Big Tech.”

Start-ups face numerous challenges when teaming with investors in a SPAC, or blank check company. While SPACs may allow start-ups to raise funds and go public quickly, investors may choose to withdraw funding that is not fully committed. 

For example, the media outlet BuzzFeed saw withdrawals by investors of about 94% of the $287.5 million raised by a SPAC ahead of BuzzFeed’s first day of trading on Monday, according to The Wall Street Journal.