SPAC Settles SEC Charges for False and Misleading Filings about Planned Merger with Trump Media

A special purpose acquisition company settled SEC charges for making false and misleading statements in connection with a planned merger with social media company, Trump Media & Technology Group ("TMTG").

In an Administrative Proceeding, the SEC stated that the company filed a Form S-1 with the SEC in which it had denied any previous discussions with "any potential target companies." However, a month after the filing, the SEC stated that the company announced a proposed merger agreement with TMTG. The SEC said that the company subsequently filed Form S-4 after announcing the proposed merger agreement, where it "mischaracterized and omitted information" regarding its interactions with TMTG. Further, the SEC found that the company failed to disclose that the SPAC's CEO had a potential conflict of interest resulting from a prior commitment contained in a Letter (of Intent) to TMTG, that the SPAC's CEO would be personally liable up to $1 million should the merger fail.

As a result, the SEC concluded that the company violated Exchange Act Section 10(b) ("Regulation of the Use of manipulative and deceptive devices") and Rule 10b-5(b) ("Employment of manipulative and deceptive devices") thereunder and Securities Act Section 17(a)(2) ("Fraudulent Interstate Transactions").

To settle the charges, the company agreed to (i) cease and desist from further securities rules violations, (ii) comply with the undertaking set forth in the Administrative Proceeding and (iii) pay a civil monetary penalty of $18 million.