Bruce Garelick, Michael Shvartsman, Rocket One Capital LLC, and Gerald Shvartsman

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 25760 / June 30, 2023

Securities and Exchange Commission v. Bruce Garelick, Michael Shvartsman, Rocket One Capital LLC, and Gerald Shvartsman, No. 1:23-cv-05567 (S.D.N.Y. filed June 29, 2023)

SEC Charges Former DWAC Board Member and Others for Insider Trading in DWAC Securities

On June 29, 2023, the Securities and Exchange Commission filed insider trading charges against Bruce Garelick, a former board member of Digital World Acquisition Corporation (DWAC), a special purpose acquisition company (SPAC); Michael Shvartsman and his firm Rocket One Capital LLC; and Gerald Shvartsman for trading in advance of DWAC’s October 2021 announcement that it had reached an agreement to acquire Trump Media & Technology Group Corp. (TMTG).
The SEC’s complaint alleges that, after DWAC appointed Garelick as a member of its board of directors in September 2021, Garelick learned about, and voted on, material nonpublic actions and updates regarding the negotiations between DWAC and its merger target, TMTG. Garelick, who was separately employed as the chief strategy officer at Rocket One Capital, then allegedly shared those updates with his boss, Michael Shvartsman, who in turn shared them with his brother, Gerald Shvartsman. Each then allegedly purchased DWAC securities on the open market based on the material nonpublic information they learned about DWAC. Michael Shvartsman placed his trades through an account in the name of Rocket One Capital. The defendants then sold their positions shortly after DWAC announced it had signed a merger agreement with TMTG and collectively realized illicit profits of more than $22.9 million from those trades. The complaint further alleges that, despite being a DWAC director and thus having certain reporting obligations, Garelick failed to file SEC Forms 4 and 5 related to his transactions in DWAC securities. 

The SEC’s complaint, filed in the United States District Court for the Southern District of New York, charges the defendants with violating the antifraud provisions of Section 17(a)(2) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5(b) thereunder and also charges Garelick with violating the reporting obligations of Section 16 of the Exchange Act and Rule 16a-3 thereunder. The complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against all defendants, as well as officer and director bars against Garelick and Michael Shvartsman. 

The SEC’s investigation was conducted by Andrew McFall, David Bennett, Darren Boerner, and Patrick McCluskey of the Market Abuse Unit and Lindsay S. Moilanen of the New York Regional Office. The case was supervised by Joseph Sansone of the Market Abuse Unit and Thomas P. Smith, Jr. of the New York Regional Office. The SEC’s litigation is being led by John Timmer, James Connor, and Mr. McFall and supervised by Olivia Choe. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.