Truth Social, the social media site launched by failed one-term former president Donald Trump in February of last year, is facing financial collapse as soon as September, according to The New York Times.
Two federal investigations of a proposed merger between Digital World Acquisition Corp. and Trump Media & Technology Group could wind up costing the venture $300 million and require the company to repay millions to investors.
That deal has been waylaid by two intensifying federal investigations. One is focused on whether preliminary merger discussions between Digital World and Trump Media violated federal securities laws. The other investigation is looking at whether a group of early investors in Digital World — who were brought into the deal by [deal architect Patrick] Orlando — engaged in improper trading.
With a six-month clock ticking, it seems unlikely that the Securities and Exchange Commission (S.E.C) will complete its investigations of possibly illegal actions taken during the founding of Truth Social, The Times adds.
Executives of Trump Media and some shareholders of Digital World have accused the S.E.C. of trying to run out the clock. In February, officials with Trump Media sent a letter to several Republican congressmen asking them to open an investigation into the S.E.C.’s refusal to approve the deal, accusing regulators of being biased against the former president. SPACs are not allowed to hold serious merger discussions before they go public, and if they do, it can violate federal securities laws. Federal authorities are trying to determine if Digital World’s talks with Trump Media were substantive enough that they should have been disclosed before the SPAC sold shares to the public in September 2021.
Those facts, according to Michael Klausner of Stanford Law School, do not bode well for Truth Social:
“If it was clearly prearranged, that was an egregious violation. The S.E.C. has the discretion to stop a merger where the disclosures violate security laws.”
Of course, it shouldn’t surprise anyone that yet another company aligned with the disgraced ex-president is imploding. After all, he’s made a career of creating companies and products that fail miserably and wind up mired in a legal morass.
