The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Patrick Orlando, the former CEO of Digital World Acquisition Corp. (DWAC), the special purpose acquisition company (SPAC) that merged with Trump Media & Technology Group. The lawsuit alleges that Orlando misled investors and regulators about the company's intentions and actions leading up to the merger with Donald Trump's social media startup, Truth Social.
According to the SEC's civil complaint, Orlando falsely claimed in public filings that DWAC had not contacted any potential merger targets and had no specific merger plans before its initial public offering (IPO) in September 2021. However, the SEC asserts that Orlando had engaged in numerous detailed discussions with representatives of Trump Media well before the IPO. The SEC's complaint, filed in Washington, D.C., federal court, alleges that Orlando had been targeting Trump Media for months and had been in "extensive merger discussions" as early as February 2021.
"Orlando knew these statements were false," the SEC stated in its complaint. "He had personally engaged in numerous lengthy discussions" with Trump Media's representatives, contrary to his public assertions. The SEC is seeking to force Orlando to relinquish all ill-gotten gains from the alleged violations, impose civil penalties, and obtain a permanent injunction to prevent him from engaging in similar conduct in the future.
The merger between DWAC and Trump Media, which allowed the company behind Truth Social to trade on the Nasdaq under the ticker DJT, was completed in March. This move marked a significant milestone for Trump Media, which aims to provide a right-wing alternative to mainstream social media platforms.
In response to the lawsuit, neither Orlando nor Trump Media provided immediate comments. The legal actions come in the wake of a previous settlement in July, where DWAC agreed to pay an $18 million fine to settle similar fraud charges. The SEC had found that DWAC misled investors by failing to disclose its plans to acquire Trump Media before its IPO.
The SEC's current lawsuit highlights a broader issue of transparency and accountability within SPACs, which have become a popular vehicle for taking private companies public. SPACs, also known as blank-check companies, are created solely to raise capital through IPOs to acquire existing companies. However, the rapid rise of SPACs has prompted increased scrutiny from regulators over their disclosure practices and financial dealings.
In addition to the SEC's legal actions, Patrick Orlando has faced other legal challenges. Just days before Trump Media's debut on the Nasdaq, Orlando sued his successor, Eric Swider, alleging a "coup d'état" to remove him from his CEO position. Orlando claimed that Swider, along with DWAC President and Secretary Alexander Cano, hacked into his accounts and sent defamatory emails to facilitate his ousting. Swider replaced Orlando as CEO in March 2023.
