(Bloomberg) -- An investor in the blank-check company that took Donald Trump’s social media startup public was found guilty in an insider-trading case. 

A federal jury in New York on Thursday convicted Bruce Garelick of conspiracy and securities fraud for trading on secret information after learning about Digital World Acquisition Corp.’s plans to acquire Trump Media & Technology Group Corp. Two of his co-defendants pleaded guilty before the trial began.

Garelick, who was found guilty on all five counts facing him, sighed deeply and began to sob after the verdict was read out. The 54-year-old put his face in one hand and said, “so unfair.” He is scheduled to be sentenced Sept. 12 and will remain free on bail until then. 

When the media startup operating Trump’s social platform began trading in March, it generated billions of dollars in new wealth for the former president, who owns a stake of about 65%. The windfall came as Trump faced mounting legal fees in fighting his many criminal and civil cases, as well as a costly campaign for a return to the White House in the November election.

The verdict was delivered in a courthouse around the corner from where Trump is on trial for allegedly falsifying business records to conceal an affair with an adult film star before the 2016 presidential election. Trump and his company weren’t accused of wrongdoing in the insider-trading case. 

“Garelick’s federal conviction is yet another stark reminder that insider trading is always a losing bet,” Manhattan US Attorney Damian Williams said in a statement. 

Garelick’s lawyers didn’t immediately respond to a request for comment.

Garelick, a former hedge fund portfolio manager who joined DWAC’s board of directors in 2021, was accused of tipping off his boss, Michael Shvartsman, about the merger plan. Shvartsman is the founder of Rocket One Capital LLC, a Miami-based venture capital firm where Garelick was the chief strategy officer. Shvartsman’s brother Gerald also traded on the secret information. 

Volatile Shares

The Shvartsman brothers, who pleaded guilty to securities fraud weeks before the trial, and Garelick made about $22 million between them, but Garelick’s share was only about $50,000, prosecutors said. 

Read More: Trump SPAC Investors Plead Guilty in Insider-Trading Case

Digital World’s acquisition of Trump Media has triggered ongoing legal headaches for a handful of people involved in the deal. Trump and two co-founders of Trump Media are embroiled in civil litigation. 

Shares of Trump Media have been volatile since going public, after hitting an intraday peak of $79.38 in their debut on Nasdaq before tumbling below $23. At 2:14 p.m. in New York on Thursday, they were up 8.9% to $53.63 each.  

Trump Media has captivated individual investors who piled into the stock and touted their investments across the Truth Social platform as a way to support Trump’s election campaign, driving the company’s market value to top $9.3 billion despite generating modest revenue last year.

Trump holds a nearly 115 million-share stake in the company, worth some $6.1 billion, but he can’t sell any of the stock until September without permission from the board.

Special purpose acquisition companies, or SPACs, are those with no commercial operations that are formed to raise capital through an initial public offering of shares to acquire or merge with an existing company. Also known as blank-check companies, SPACs quickly evolved from an obscure corner of the financial world to an investing craze before coming under more government scrutiny.

In his closing statement Wednesday, Garelick’s lawyer Jonathan Bach acknowledged that his client bought shares in Digital World Acquisition Corp. But he told the jury Garelick stopped when he learned, through his board seat, of plans to publicly announce the deal. Until then, Bach argued, Garelick didn’t know whether the DWAC-Trump Media merger would actually occur. 

‘Taste of the Action’

“Why would he act with intent to break the law for $49,000?” Bach said. “Why would he risk his whole career and start acting that way?” Bach suggested another person connected to DWAC may have leaked information about the potential merger.

Prosecutors pointed the jury to a time line of trades, emails, texts and phone calls in 2021, arguing the evidence showed Garelick wanted to get ahead of the potential acquisition announcement in October of that year. While DWAC had other potential acquisition targets, Garelick knew it had an inside track on Trump Media, federal prosecutor Matt Shahabian told the jury on Wednesday. 

Garelick staggered his purchases over time to avoid detection and failed to file disclosure statements with regulators, Shahabian said.

“The defendant got greedy,” Shahabian said. “He wanted a taste of the action. He knew what he was doing was wrong. He thought no one would notice.”

Garelick’s lawyer argued the slow, gradual investments were just part of a personal trading strategy.

The case is US v. Shvartsman, 23-cr-307, US District Court, Southern District of New York (Manhattan).

--With assistance from Bailey Lipschultz and David Morris.

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