Garnering praise from progressives including Sen. Elizabeth Warren, U.S. federal regulators have launched investigations into the proposed merger of a special purpose acquisition company with a budding social media company backed by former President Donald Trump.
Ongoing probes conducted by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) were revealed on Monday in an SEC filing by Digital World Acquisition Corporation, a "so-called blank-check company that raised nearly $300 million in an initial public offering in September" and intends to merge with Trump Media Technology Group, the New York Times reported.
Regulators are reportedly seeking information about stock trading activity and communications between Digital World and Trump Media that occurred before the planned merger was announced on October 20.
According toCNBC:
DWAC's stock price dramatically increased after the deal was announced, and trading volume in the company's shares exploded.
Shares of the blank-check firm, which had been trading at around $10 per share before the merger was disclosed, rocketed to as high as $175 per share in the days afterward.
Warren (D-Mass.), who three weeks ago asked the SEC to investigate possible securities violations related to the merger, was among those who welcomed the probes.
"Nobody is above the law," she tweeted. "There may have been serious violations of securities laws during the proposed merger of Digital World Acquisition Corporation and Trump's media company."
According to Digital World, the investigations began in early November, prior to Warren's request but soon after the Timesreported that Digital World CEO Patrick Orlando "had talks with representatives of Trump Media as far back as March about doing a deal."
Special purpose acquisition companies (SPACs) like Digital World raise money during an initial public offering, after which they purchase another corporation in order to sell shares on stock exchanges. When SPACs go public, however, "they are not supposed to have engaged in merger talks without disclosing that to investors," the Times explained Monday.
In its regulatory filing submitted on Monday, Digital World announced that "institutional investors had committed to providing an additional $1 billion to finance the merger in exchange for deeply discounted shares," the newspaper reported.
CNBC reported that "Trump's company plans to launch a social media platform called 'TRUTH Social,' which purportedly would compete with Twitter and Facebook, both of which have banned the former president because of his incitement of the January 6 Capitol riot."
Citizens for Responsibility and Ethics in Washington responded to news of the investigations by pointing out that "Trump's legal troubles are only growing."
