Trump's SPAC Deal Is Under Investigation, Because Of Course It Is

The SEC and FINRA want to know more about the blank-check company buying Trump's nonexistent social media empire.

Special purpose acquisition companies: We know them, we “love” them, they’re making millions for top law firms, all at the low, low cost of being a weird not-yet-prohibited legal fiction specifically designed to circumvent the regulatory oversight and due diligence traditionally involved in bringing a company public.

Really quickly here, if you’re not yet familiar with what a SPAC is, it’s basically a shell company that does nothing but raise money from investors through an initial public offering while cleverly winking at regulators as it passes them by. Following the IPO, money in hand, the SPAC acquires or merges with an existing company, and bingo, you have a company that (hopefully) actually does something but that avoided a bunch of pesky disclosure requirements intrinsic to a normal IPO process.

If you think that sounds a little troubling just as a concept, it definitely is. SPACs have been around for a while, but they have exploded in popularity (and size) fairly recently. The Securities and Exchange Commission has been paying attention. In fact, the SEC has been sounding more and more alarmed about SPACs in general, as well as about a number of individual SPAC deals in particular.

Now, if you were thinking that shady funding sources and a complete absence of truthful disclosure reminded you of someone who was in the news a lot up until the last few months, you’d be spot on, because of course Donald Trump is involved in a SPAC deal.

The big difference from the Trump SPAC deal and a normal SPAC deal, to the extent that any of this can be considered normal, is that the company the SPAC is poised to acquire and bring public also doesn’t currently do anything in this case. 

According to a press release from the entities involved, Trump Media & Technology Group will merge with the SPAC Digital World Acquisition Corp. to allegedly bring Trump’s new digital media platform public. Notably, Donald Trump has not yet launched a social media platform, unless you count his crappy failed blog, which you shouldn’t.

So, a company that does nothing acquires another company that currently does nothing so that the latter does not have to disclose anything to regulators, and somewhere near the top of all this is Donald J. Trump. Hmm.

If that sounds to you like it’s got to be about the most illegal thing ever, thank God someone at the Securities and Exchange Commission has also considered that possibility. The agency has asked DWAC to disclose information about the company’s board of directors, investors, stock trading policies, and communications with its acquiree, Trump Media & Technology Group.

Separately, DWAC is also being probed by the Financial Industry Regulatory Authority, Wall Street’s self-regulatory organization. DWAC calls what it received from FINRA “preliminary, fact-finding inquiries.” The company said it is cooperating with the agencies and no indication of wrongdoing had been found. 

We do not know a whole lot yet about the SEC’s investigation into Trump’s SPAC deal. We do know that Trump’s company missed a previously announced November deadline to launch its beta version of TRUTH Social. And we know that former dairy farmer and soon-to-be former Republican Congressperson Devin Nunes is being tapped as its CEO. None of this bodes well for investors in Trump’s nonexistent social media empire.

Also, come on, we know Donald Trump. If this whole thing doesn’t turn out to be another giant grift, whose failure he’ll inevitably blame on liberals censoring him, I’ll happily eat some crow. But I don’t think I’ll have to.

Time will tell what the SEC uncovers here. Seems like the agency is finally getting its footing under its new head Gary Gensler. Perhaps some even bolder enforcement actions are on the horizon.


Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.