Former head of firm that merged with Trump Media sued by SEC over fraud claims

Former President Donald Trump notched a business win earlier this year when Trump Media & Technology Group merged with Digital World Acquisition, providing him with a substantial financial infusion.

Now, as CNBC reports, former Digital World CEO Patrick Orlando, who was at the company's helm ahead of the merger with Trump Media, has been sued by the Securities and Exchange Commission (SEC) over allegations of fraud.

Basis of SEC claims

At the heart of Orlando's new legal trouble is the SEC's assertion that he was dishonest with regard to his then-company's plans to join forces with the firm behind the former president's Truth Social platform.

According to the SEC's complaint, Orlando was responsible for public filings representing that Digital World Acquisition Corp. had not been in contact with any merger targets and was not planning any such future moves.

The civil complaint states that, contrary to those representations, “Orlando knew these statements were false.”

The SEC contends that Orlando “had personally engaged in numerous lengthy discussions” with officials from Trump Media and that he had sought a merger with the company “for months” and therefore engaged in fraudulent conduct.

Prior settlement and potential new penalties

As Reuters reports, Digital World itself entered into a settlement with regard to regulatory charges of material misrepresentation to investors.

The allegations in that matter were similar to those now leveled against Orlando personally, in that the SEC contended that Digital World did not make proper disclosures in formal filings regarding its plan to acquire Trump Media and regarding its pursuit of a merger ahead of its initial public offering.

Ultimately, Digital World agreed to adhere to a cease-and-desist order and to pay a penalty of $18 million if the merger proceeded to conclusion.

In the new case against Orlando in his own capacity, the SEC is asking the court to compel the disgorgement of “all ill-gotten gains” stemming from the alleged securities law violations.

The SEC is also seeking civil penalties as well as a civil injunction prohibiting Orlando, who left his leadership position at Digital World in March of 2023, from engaging in similar conduct in the future.

Merger's impact on Trump, market

The merger between Trump Media and Digital World was finalized this past March, a milestone which resulted in the rebranding of Digital World to Trump Media & Technology Group Corp. and brought the former president a stake said to be worth billions.

Trump Media stock now trades under the “DJT” ticker symbol, and it has been marked by notable volatility in recent months.

While the value of DJT stock has declined since its March apex, and Trump himself has seen portfolio losses as a result, the potentially positive impact of the company namesake's recent surge in popularity and his status as the current frontrunner in the race for the White House remains to be seen.