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DWAC, which was found to have violated antifraud provisions of federal securities laws, agreed to a cease-and-desist order and to pay an $18 million penalty in the event it closes a merger transaction, the SEC said.
The SEC said DWAC misled investors by failing to disclose in filings that it had formulated a plan to acquire Trump Media & Technology Group Corp and was pursuing the acquisition before DWAC’s IPO.
DWAC did not immediately respond to an emailed request for comment.
SPACs are listed shell companies that raise cash to acquire and take public a private company, allowing targets to sidestep the stricter regulatory checks of an initial public offering.
The SEC cracked down on SPACs after a frenzy of deals in 2020 and early 2021 sparked concerns that some investors were getting a raw deal. In 2022 the agency proposed new SPAC regulations to boost disclosures and rein in lofty revenue projections.
Gurbir Grewal, director of the SEC’s division of enforcement, said DWAC failed to disclose the merger discussions it had with Trump Media & Technology Group and “a material conflict of interest of its CEO and chairman.”
Trump Media & Technology Group in October 2021 announced a deal to go public by merging with DWAC. It remains uncertain.
If it closes, Trump Media would gain access to more than $1 billion in cash from Digital World’s institutional investors, such as hedge funds. According to a Feb. 2, 2021 services agreement, Trump controls 90% of Trump Media.
