Trump Media insider trading trial begins with co-founder testifying, 'I've never been paid at all'

• The New York federal criminal trial of Bruce Garelick, who is accused of insider trading in shares of a shell company ahead of its announcement of a plan to merge with Trump Media, began Tuesday.
• The trial is taking place blocks from where former President Donald Trump is on trial in a case related to a hush money payment to porn star Stormy Daniels.
• Andy Litinsky, who co-founded Trump Media, was the first witness at Garelick’s trial.

Bruce Garelick walks following a hearing at the Manhattan Federal Court, in New York City, July 20, 2023.

The federal criminal trial of a man accused of insider trading in shares of a shell company ahead of its announcement of a plan to merge with Trump Media began Tuesday, just blocks from where former President Donald Trump was sitting at his criminal trial in a case related to a hush money payment.

The first witness in the insider trading case against Bruce Garelick was Andy Litinsky, a co-founder of Trump Media. Litinsky himself is involved in complicated civil litigation against Trump in several jurisdictions, over how many shares he is owed in Trump’s eponymous social media company.

“It’s a long story,” Litinsky sighed on the stand in U.S. District Court in Manhattan.

Garelick has decided to take his chances with a jury after his two co-defendants, the brothers Michael Shvartsman and Gerald Shvartsman, pleaded guilty on April 3 to insider trading charges in the case.

The allegations

Garelick is accused of sharing non-public material information about the merger plans by the shell company, Digital World Acquisition Corp., with his boss, the Florida venture capitalist Michael Shvartsman and Gerald in 2021.

All three men were accused of buying up DWAC stock ahead of the merger announcement based on non-public information, then selling the shares after the price soared on the heels of an announcement of the deal with Trump in October 2021.

“Now, whatever your views on the former president, he makes a big splash in the news,” assistant U.S. Attorney Elizabeth Hanft told the 12-member jury in her opening statement.

Garelick was on DWAC’s board of directors in the months leading up to the merger announcement. As such, he was barred from sharing material non-public information about the company that might be used by others to buy shares and exploit a price rise after the information became public.

“What did the defendant do? Exactly what he wasn’t allowed to do,” said Hanft.

The prosecutor said that although Garelick only made about $50,000 in allegedly illicit profits from his DWAC trades, Michael Schvartsman made $18 million, Gerald Shvartsman made $5 million, and others who were tipped off as a result of Garelick’s alleged tips also made money.

Garelick’s lawyer, Jonathan Bach, told a radically different story about his client in his opening statement.

The defense argument

“Bruce Garelick is innocent,” Bach said. “He did not engage in insider trading. He did not commit any crime. Bruce is an honest, ethical man.”

“He never told anybody, not a soul, anything about what he learned as a board member at DWAC,” the attorney said.

Bach said Garelick did buy some DWAC shares, but stopped acquiring its stock when he began to learn information that could affect the share price if the news became public.

“He followed the rules,” said Bach, who argued that it was “silly” to suggest that Garelick was willing to throw away decades of work in the investment sector by engaging in illegal trading for such a relatively small amount of personal profit.

The defense attorney also sought to draw a distinction between Garelick, who lived and worked remotely in Providence, Rhode Island, in 2021 and Michael Shvartsman, who lived and worked in the Miami area.

Garelick “was in many ways an outsider” in Shvartsman’s business and social circles, Bach said.

“You’re not going to see any evidence, at all, that Bruce tipped anybody. Because he didn’t. Bruce was not a tipper,” Bach said. “You will see evidence that others gave tips.”

Bach also alluded to the nature of Michael Shvartsman’s circles, saying they were made up of “people who treated each other in very unusual ways.”

Twice during his opening statement, Bach suggested to jurors that their verdict would hinge on the question of Garelick’s “state of mind” at the time of the conduct prosecutors claim was criminal.

Garelick, Bach argued, “acted in good faith at all times.”

Assistant U.S. Attorney Matthew Shahabian then called Litinsky to the witness stand.

Litinsky was a contestant on Trump’s NBC reality television show “The Apprentice” years before he and his Apprentice “roommate” Wes Moss pitched Trump on the idea of starting a company, Trump Media, that would include a social media app.

Donald Trump, right, and producer Andy Litinsky, left, attend the Comedy Central Roast of Donald Trump at the Hammerstein Ballroom in New York City on March 9, 2011.

In his testimony, Litinsky detailed the events that led up to Trump Media’s merger agreement with DWAC.

Shahabian repeatedly had Litinsky describe the confidentiality agreements in letters of intent that Trump Media signed with two prospective merger partners, DWAC and Bennessere Capital Acquisition Corp. The agreements specifically prohibited the parties from sharing information about the potential deal without outsiders.

“Did you share information” with outsiders? Shahabian asked Litinsky.

“No, I did not,” Litinsky replied. “It is confidential and it would be against the rules to do that.”

Asked if he traded stock based on the confidential information, Litinsky likewise replied, “No,” noting, “It would be against the rules.”

The prosecutor’s line of question was intended to underscore to jurors the rules that Garelick is accused of breaking.

Three years’ work and no pay

Under questioning by Bach, Litinsky revealed how capricious and demanding Trump could be in the months leading up to the agreement in late October 2021 to merge Trump Media with DWAC.

Bach appeared to be trying to hammer home to jurors the idea that any potential deal with Trump was often just that — potential — because the former president had a history of walking away from deals.

Litinsky detailed just how uncertain that business could be. “I’ve never been paid at all,” by Trump Media, Litinsky testified. testified Litinsky, who was forced out of Trump Media well before the merger was finally consummated late last month, which led Trump Media to become publicly traded.

“It’s been three-and-a-half years, so they never ‘stopped’ paying me,” Litinsky told Bach after the lawyer asked if Trump Media, which owns the Truth Social app, had ceased paying him for his services in helping arrange the merger.

Bach also asked Litinsky, “At one point he [Trump] demanded that you transfer all of your equity [in Trump Media] to his wife Melania?”

“Yes, something like that occurred,” Litinsky replied.

Bach then asked: “And he threatened that he would blow up the deal if you didn’t make that transaction?”

Litinsky did not get to answer that question after a prosecutor objected to it, and apparently the objection was sustained by Judge Lewis Liman after a sidebar conference with the attorneys.

Litinsky testified that in the original deal to co-found Trump Media, he and Moss were meant to get a 10% stake in the private company, with Trump getting the remaining 90%.

But “former President Trump made us pay his lawyers” in the deal, leaving Moss and Litinsky with “a bit less, 8.6%,” Litinsky testified.

At Trump Media’s current trading price, that stake would still be worth hundreds of millions of dollars.

But in a separate court case, Donald Trump is arguing that Litinsky and Moss deserve none of their promised shares.

Litinsky also testified that although Trump Media originally had serious talks in 2021 about merging with Bennessere, Donald Trump then pivoted to talks with DWAC. Both companies were led by Patrick Orlando.

When Bach asked Litinsky if he had wanted to do the deal with Bennessere, and not DWAC, the witness answered, “I would very much agree with that.”

Litinsky also said that even as they explored a merger with DWAC, Trump was in discussions about partnering with other entities. These included the right-wing social media companies Gettr and Parler.

Bach also implied that Litinsky had concerns in August of 2021, two months before the merger was announced, that his position at Trump Media was at risk.

“You began hearing that Trump’s lawyer in New York and others were starting to blow up your relationship with Trump,” Bach asked Litinsky, who replied, “I would agree with that, but it’s very complex.”

There was some conflict with “the Trump Organization or the Trump family” in connection with the merger talks, Litinsky said.

In addition to the internal drama, Litinsky revealed new details about how Trump Media and Technology Group got its name.

He testified that the company was originally called Trump Media Group, or TMG. But it changed its formal name to Trump Media & Technology Group shortly before the DWAC merger was announced, after learning that a comedy group had the rights to the business name TMG.

“We thought the risk was too great to go to battle with a comedy group,” Litinsky said, deadpan.