New York Times: “Just days after Donald J. Trump left the White House, two former contestants on his reality show, ‘The Apprentice,’ approached him with a pitch. Wes Moss and Andy Litinsky wanted to create a conservative media giant. Trump was taken with the idea. But he had to figure out how to pay for it. This month, the former president found a way. He agreed to merge his social media venture with what’s known as a special purpose acquisition company, or SPAC. The result is that Trump – largely shut out of the mainstream financial industry because of his history of bankruptcies and loan defaults – secured nearly $300 million in funding for his new business. To get his deal done, Trump ventured into an unregulated and sometimes shadowy corner of Wall Street, working with an unlikely cast of characters: the former ‘Apprentice’ contestants, a small Chinese investment firm and a little-known Miami banker named Patrick Orlando. Orlando had been discussing a deal with Trump since at least March. That was well before his SPAC, Digital World Acquisition, made its debut on the Nasdaq stock exchange last month. In doing so, Orlando’s SPAC may have skirted securities laws and stock exchange rules, lawyers said.”

“SPACs sell their shares to investors through an initial public offering and then find a private company with which to merge. Because SPACs are empty vessels, stock exchanges allow them to list their shares without disclosing much financial information. But that creates opportunities for SPACs to serve as backdoor vehicles for companies to go public without receiving the kind of investor scrutiny they would in a traditional listing. To prevent that, SPACs aren’t supposed to have a merger planned at the time of their IPO. Lawyers and industry officials said that talks between Orlando and Trump or their associates consequently could draw scrutiny from the SEC.”

“Another issue is that Digital World’s securities filings repeatedly stated that the company and its executives had not engaged in any ‘substantive discussions, directly or indirectly,’ with a target company – even though Orlando had been in discussions with Trump. Given the politically fraught nature of a deal with Trump, securities lawyers said that Digital World’s lack of disclosure about those conversations could be considered an omission of ‘material information.'”