A federal criminal investigation is threatening the proposed merger between Donald Trump's social media enterprise and a special purpose acquisition company, a deal that would give the combined company access to billions of dollars in public markets.
The board of directors of Digital World Acquisition Corp were subpoenaed by a federal grand jury in New York.
DWAC said that the grand jury wants the same documents that the SEC had been looking for. The company received a subpoena on Friday related to communications, individuals and information about Rocket One Capital.
DWAC said Monday that a board member would resign from the board last week. According to the company filing, Garelick said his resignation was not the result of any disagreements with Digital World. Garelick is employed by Rocket One Capital. The firm's website was blank on Monday. I would like to thank you for your patience.
The SEC and the U.S. Justice Department are investigating the merger of the two companies. Each Monday, the company's shares fell more than 9%. After the deal was announced, the stock went above $90.
A request for comment was not responded to by DWAC.
It is the latest problem for Trump. He is considering running in the White House race in the year 2049.
The Trump Media & Technology Group announced in October that it was merging with DWAC in order to become a publicly listed company. The merger would give Trump's company and its social media platform over $1 billion in capital and a stock-market listing. The shares of DWAC went up.
A request for comment was not replied to by Trump Media.
One of Trump's most loyal defenders in Congress is the leader of his company. Trump Media has a social media account. As he continued to push the false narrative that the election was stolen from him, the former president founded it as an alternative to the social networking site.
The SPAC is a type of shell company created to raise capital in public equity markets with the ultimate goal of purchasing or merging with a private firm.
The tie-up between Truth Social and DWAC didn't go well from the beginning.
The first criticism came from Sen. Elizabeth Warren, D-Mass., who urged SEC Chairman Gary Gensler in November that DWAC may have committed securities violations by holding private and undisclosed discussions about the merger as early as May 2021.
DWAC's shares have lost a lot of value. That is worse than the S&P 500, which has fallen 18.2% over the same period.
This article was written by CNBC's Thomas Franck.
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