The wild probe into investors of DWAC, Trump Media’s proposed merger ally

By then, however, the insider trading by investors in the SPAC, Digital World Acquisition, had already begun, according to documents filed recently in the criminal case against three Digital World investors who’ve been charged with securities fraud in New York federal court.

Digital World’s chief executive, Patrick Orlando, a Miami financier Trump had hosted at his golf clubs, had been telling investors privately for months that he’d been talking with Trump about the deal, the filings assert — a violation of federal securities law, the Securities and Exchange Commission would say later, given his company’s pledge in regulatory filings that its leaders had held no talks with any merger targets.

One investor, the Miami Beach businessman Anton Postolnikov, had amassed a huge stake in Digital World. Postolnikov, who was born in Russia and is the nephew of a longtime Russian government official, sold most of his stake just days after Trump’s announcement sent the stock soaring, according to an FBI agent’s search warrant affidavit. His profit: $22 million.

Another, a Ukraine-born nightclub manager turned private equity investor named Michael Shvartsman, told his business partners and a neighbor about the moneymaking opportunity, according to the affidavit — before securing $18 million in profits for himself.

Those profits caught the attention of federal officials who launched a sprawling investigation into Digital World’s investors, the details of which raise questions about how Trump, who built his political reputation in part on having mastered “the art of the deal,” ended up committed to a business arrangement that federal agents now allege was undermined from its inception by financial fraud.

Trump and Trump Media have not been accused of wrongdoing in the case. But Trump Media has been blocked from accessing the $300 million it expected to receive through the merger — money that it could use to build out Truth Social, Trump’s main online megaphone, ahead of the November election.

Rejected by banks and lenders over the Jan. 6, 2021, insurrection and his long history of bankruptcies and business failures, Trump had approved the merger of his company with a special purpose acquisition company as a way to raise money in the months after he lost the White House. Often called “blank check” firms, SPACs promise access to public stock investors with fewer financial disclosures than a traditional corporate listing requires.

Trump allies have claimed that the SEC’s delay in approving the merger proves he’s being persecuted by the Biden administration. But the cache of investigative documents, submitted as part of the pretrial discovery process ahead of a spring trial of those already charged, shows the investigation went far beyond the SEC.

The documents detail the involvement of agents and investigators from the FBI, the SEC and Homeland Security Investigations, which is the division of the Department of Homeland Security dedicated to rooting out cross-border criminal activity and which includes one of the government’s most elite anti-money-laundering teams. The documents suggest the investigation is ongoing.

Investigators used a microphone-wearing undercover informant to secretly record Shvartsman’s attempts to move the profits — assets he told the informant he’d gained from the “s— [that] happened with Trump” — into a web of offshore accounts. The documents also claim Shvartsman offered to introduce the informant to an unnamed official in Ukraine who needed help moving a “significant amount of money.” Whether officials pursued that tip is unknown.

The documents also reveal that FBI agents secretly tracked the holiday travel to Mexico of a Digital World board member so he could be intercepted on his return to John F. Kennedy International Airport in New York, where Customs and Border Protection officers commandeered his iPhone. While the board member waited for its return, the documents state, FBI agents covertly copied the phone’s contents.

The hundreds of pages of documents include a previously sealed indictment, HSI reports detailing undercover operations, emails, text messages, transcripts of recorded conversations, prosecutors’ memos summarizing evidence, and affidavits supporting search and seizure warrants for phones, digital data and bank accounts.

At a hearing in July, Nicolas Roos, an assistant U.S. attorney for the Southern District of New York who has led some of his office’s highest-profile cases, including the prosecutions of former Trump attorney Michael Cohen and cryptocurrency mogul Sam Bankman-Fried, said prosecutors were in possession of roughly 2.5 million emails and other documents, as well as copies of several seized cellphones.

Trump’s campaign referred comment for this story to Trump Media. Jesse Binnall, an attorney for Trump Media, said in a statement that the alleged wrongdoing “had no connection to Trump Media whatsoever.” Noting that Trump Media is suing The Washington Post over a previous story about the merger plans, Binnall warned that “any allegations against Trump Media are maliciously and transparently false.” He did not identify any specific reporting that he alleged to be false.

Shvartsman, his brother Gerald, and Bruce Garelick, the investment chief of Shvartsman’s private-equity firm Rocket One Capital, have been charged with conspiracy and securities fraud in the case.

Tai Park, an attorney for Shvartsman, said in a statement to The Post: “Any suggestion of wrongdoing is flatly denied. He has [pleaded] not guilty and looks forward to the trial where we expect he will be vindicated.” In a December court filing, Park said prosecutors had indicated new money-laundering charges could still be filed. Attorneys for Gerald Shvartsman and Garelick did not respond to requests for comment.

The SEC and Department of Homeland Security, which oversees HSI, declined to comment. The FBI referred comment to the U.S. attorney’s office, which also declined to comment.

Postolnikov, Orlando, Digital World and Rocket One did not respond to requests for comment. Neither Postolnikov nor Orlando, who was terminated as Digital World’s chief as the probe unfolded, has been charged.

In July, Digital World said it would pay $18 million if the merger goes through to settle SEC charges that it had misled investors and violated rules designed to counter fraud. Digital World said last month in an SEC filing that investigations by the SEC and Justice Department could “delay, materially impede, or prevent” the merger.

The biggest financial losers from the insider-trading scheme, however, probably were early Digital World investors who believed in Trump’s company enough to buy up shares in the hours after he announced the merger deal. In the days when the insiders were cashing out, Digital World’s share price peaked at $175. Shares closed Friday at $40.60.

In June 2021, the court filings say, Orlando went to meet with Shvartsman and other prospective investors at the Miami-area offices of Rocket One, a little-known private equity firm that had marketed itself on LinkedIn as investing in “fearless entrepreneurs.”

Shvartsman had helped run a nightclub in the 1990s in Edmonton, Alberta, called Kaos that local police alleged was financed by the Russian mob, a 2022 Financial Times report said — a claim Shvartsman denied, and for which he was never charged. He also founded Transact First, a company whose “cashless ATMs” help marijuana dispensaries transfer money from banks that would otherwise reject them as customers under federal law, according to a Bloomberg News report in 2022, which called him the “granddaddy” of the “major cashless ATM players.”

The meeting came one month after Orlando had signed a registration statement filed with the SEC saying Digital World had not “initiated any substantive discussions, directly or indirectly, with any business combination target.”

But messages included in an FBI affidavit indicate that Trump’s company was part of the conversation in the meeting. In an email shortly afterward, Garelick wrote that he and Shvartsman had talked with Orlando about the “future payment processing needs for the Trump Media Group.”

One executive at Rocket One, Allen Beyer, told the firm’s leaders after the meeting that he was underwhelmed, writing in a text message that Trump’s last online venture, a blog, “was an embarrassment” and that the idea of an app just for “Forever Trumpers” would “be a bust,” the affidavit said. “Would you ever be associated with this as a ‘founder’ or anything in case it goes up in literal flames?” Beyer wrote. He did not respond to requests for comment.

Garelick replied, however, that the investment came with “downside protection,” the affidavit said. Garelick, Shvartsman and his brother, Gerald, who ran an outdoor-furniture store, invested enough to guarantee Garelick a seat on Digital World’s board, the indictment said.

The three men had signed confidentiality agreements before the meeting saying they would not trade on the inside information. But over the next few months, they bought up hundreds of thousands of dollars of Digital World shares and trading contracts, known as warrants, for small fractions of the price the shares would command once the deal was publicly disclosed.

The men also spoke with Postolnikov, another Miami-area entrepreneur who, like Shvartsman, was involved in the business of international payments. According to British financial records, Postolnikov owns a bank headquartered on the small Caribbean island of Dominica, called Paxum, that promotes itself as a financial conduit for online adult entertainment — an industry, like marijuana dispensaries, that banks traditionally have chosen to avoid.

Born in St. Petersburg, Postolnikov had in 2017 faced an arrest warrant in his hometown on charges of tax fraud, according to a court ruling obtained by The Post. That warrant, the ruling shows, was lifted in 2018, following the direct intervention of Russia’s deputy prosecutor general, who said the case was without merit.

By 2021, Postolnikov, whose uncle, Aleksandr Smirnov, had served for most of the last two decades as a senior member of the Russian government, was saying in online profiles he lived in Miami Beach. In March 2021, he donated $30,000 to Florida Gov. Ron DeSantis’s reelection campaign, campaign finance records show. A month later, according to Miami-Dade property records, a company he owns bought a $6 million condo on Fisher Island, a private island near Miami Beach once named “America’s richest Zip code.”

In June 2021, after the meeting with Orlando, Garelick wrote Postolnikov an email referring to some “good times last night,” without details, and asked about his interest in investing in “that Trump Media Group SPAC we mentioned,” the affidavit alleges.

When Digital World announced its initial public offering in September 2021, it made no mention of Trump and said only that it intended to focus on “middle market and emerging growth technology-focused companies in the Americas.” But a day later, Postolnikov started buying hundreds of thousands of stock units and warrants in Digital World via a company called APLC Investments, a search warrant affidavit alleges.

During that time, he also spoke on the phone “regularly” with Orlando and Gerald Shvartsman, according to an FBI agent’s affidavit in support of a search warrant seeking emails and other data from their Apple and Google accounts.

Within hours of the Oct. 20, 2021, merger deal announcement, the price of Digital World’s shares and warrants exploded. Shares first listed at $10 sold for prices as high as $175. And within days, the indictment said, all of the men had sold their shares for major profits, including $4.6 million for Gerald Shvartsman and $50,000 for Garelick.

The men celebrated with a few others they’d told about the “good bet,” including a neighbor, a friend and an employee, the records show. After his furniture store employee and the employee’s father made $2 million in profits within two days of Trump Media’s announcement, Gerald Shvartsman sent the employee a text message: “I’m happy for you. I’ll be waiting for my commission,” the records show.

But all stock market trades are monitored, and the frenzy of activity in an otherwise unremarkable SPAC just before its big kickoff attracted federal attention. By the end of October, a Digital World filing shows, the Financial Industry Regulatory Authority, an internal watchdog for the securities industry known as Finra, had started asking about the trades.

On the night of Dec. 31, 2021, Garelick had just landed at Kennedy Airport in New York after a vacation with his girlfriend to Cancún and Tulum when a customs agent told him he had been flagged for a secondary screening, according to a CBP inspection report filed in court.

In a backroom, two CBP officers began asking about his work with Digital World, saying they’d looked him up online and thought he had an “impressive background,” Garelick said in a court statement filed late last year. They also asked for his iPhone 11 Pro Max, plus the password to unlock it, assuring him it was all routine, he said.

What Garelick didn’t know is that two days earlier, a magistrate judge in Brooklyn had signed a warrant allowing FBI agents to search Garelick’s phone and not tell anyone about it, a copy of the judge’s ruling shows. While Garelick was waiting, an FBI agent took photos of his phone’s text messages and a forensic examiner raced to make a full copy of its contents, a prosecutor’s memo says.

Around 9:30 p.m., after the inspection had gone on for an hour and 14 minutes, the agents ended the phone-data extraction early so as not to alert Garelick that he was under criminal investigation, the memo said. The border agents gave Garelick his phone back, and he went on his way.

The investigators weren’t finished, however. In a search warrant affidavit, FBI agents said they were on the hunt for any information related to the relationships between Orlando, Postolnikov, the Shvartsman brothers and others who traded in Digital World stock.

They weren’t the only ones interested in the case. SEC officials had one month earlier started asking Digital World about its investors’ identities and its communications with Trump Media, an SEC filing shows. And a team of Miami agents specializing in illicit proceeds and foreign corruption inside HSI’s El Dorado Task Force, which tracks financial crime, launched a joint effort alongside the FBI and SEC — code-named “Trust Social” — once they’d realized they were pursuing “the same investigative targets,” HSI said in a July 2023 report documenting the indictments filed in court.

In December 2021, more than $16 million had been moved from a Rocket One brokerage account into two OptimumBank accounts in Shvartsman’s name, the indictment said. From there, the money was shuttled into a “wash account” that Shvartsman’s company Transact First had used to transfer millions of dollars in a single day, an HSI agent said in an affidavit for a bank-account-seizure warrant later signed by a judge.

The account’s “sheer volume of high-dollar transactions” made it a “convenient tool to conceal the proceeds of illegal activity,” according to the affidavit. Over the next several months, it alleged, millions of dollars filtered from that account into another bank account in Shvartsman’s name.

Trump Media later received a $2 million promissory note from a lender called ES Family Trust, Digital World said in an SEC filing last year. According to media reports, the trust’s only named trustee, Angel Pacheco, says on LinkedIn he is also a director at Paxum, Postolnikov’s bank.

Pacheco, who a Florida business record says is a co-manager with Shvartsman of a Miami company called Foundation Card Services, did not respond to requests for comment. The owner of an email address for the trust has not responded to questions about where the money came from.

One afternoon in December 2022, Shvartsman met with a specialist at a Marriott hotel near Miami International Airport to discuss what his lawyer would later describe in a court declaration as his “interest in asset protection.”

Shvartsman told the man he needed help, due to the “recent Russian related sanctions,” in moving some of his assets — which included “some real estate, a small amount of cash (described as ‘a few million bucks’) and a yacht” — into a company he intended to create in Belize, according to an HSI investigative report in the “Trust Social” case filed with the court.

The specialist, though, was actually a government informant wearing a hidden microphone, according to HSI investigative reports, which refer to him only as “SA-2894-MI.” And after Shvartsman asked for his assistance in setting up new bank accounts, perhaps in Switzerland or Western Europe, the informant told Shvartsman he would be happy to help — in exchange for a fee “above the typical rate.”

Over the next several months, the informant and Shvartsman met regularly to hash out a plan for how the informant could shuttle Shvartsman’s assets around the globe, according to the government’s transcripts of the conversations filed in court. The records do not detail how the informant was introduced to Shvartsman or where he lived, though he signed off after one call saying he was in “British Summer Time.”

The secretly recorded meetings featured moments of tension. During one March 2023 meeting inside a Rocket One office north of Miami, Shvartsman signed documents to move his assets into an offshore trust and then warned he would “have to kill” the informant if the man tampered with Shvartsman’s fortune, according to the government’s transcript of the meeting.

When the informant told another man in the room, “That’s the second time he said he’s going to kill me,” Shvartsman responded, “I don’t f— around,” the transcript states.

But the conversations also showed the men getting to know each other. During the March meeting, Shvartsman said the main reason he wanted to move his assets was “the ordeal with ‘Trump’” and his “desire to not have the funds acquired from that investment taken from him,” according to a “debriefing” statement from the informant included in the HSI report filed with the court. Shvartsman’s attorney also told the informant then that his client was “your classic serial entrepreneur” and had a “fetish for superyachts,” according to the government’s transcript.

During the meetings, Shvartsman offered to introduce the informant to new clients, saying he knew a Russian-speaking “high-ranking Army or military officer” in Ukraine who needed help moving a “significant amount of money,” according to a transcript detailing what the informant told agents after one April 2023 lunch. “There’s guys in the Ukraine sitting on a lot of cash,” Shvartsman told the informant in another meeting, according to the government’s transcript.

But he also extended to the informant his own connections, saying he had a Russian friend who lived on Fisher Island and owned a bank in Dominica that could provide banking services to Russian, Chinese or Ukrainian individuals facing “sanction issues” or other financial restrictions, the government’s transcript shows.

“We do a lot of business together. He’s a very good friend of mine,” Shvartsman said, according to the transcript. In the version of the HSI report filed in court, the friend’s name is redacted.

One morning in June 2023, four FBI agents, two HSI agents and officers from the local police showed up at Shvartsman’s home in the Miami suburb of Sunny Isles Beach with a warrant for his arrest. Two other arrest teams nabbed his brother and Garelick at their homes in nearby Aventura and Fort Lauderdale, a Justice Department filing said.

In the HSI report from July documenting the arrests, agents said all three men had “ties to Ukraine and Russian Politically Exposed Persons (PEPs),” a term for prominent officials believed to be vulnerable to bribery or corruption. A Justice Department statement said the men faced up to seven counts of conspiracy and securities fraud, with maximum sentences of 90 to 130 years in prison.

But Shvartsman’s talks with the informant didn’t stop.

In July 2023, a week after he pleaded not guilty in a New York courtroom, he met with the informant to ask about the status of his asset transfers, the government’s transcript of their meeting shows. The informant assured him that his assets were in the process of moving from Hong Kong to the United Kingdom and then to Belize, according to the transcript — “the full Singapore with a double dip, as we call it, with having the U.K. thrown in there, just to give it that added cleanliness and polishing off,” he said.

The men also discussed whom Shvartsman wanted to nominate as the ostensible leaders of the local shell companies — “no Russians,” the informant confirmed — and proposed a crew that, at one point, included “two Ukrainians, a Canadian and a Bulgarian,” the transcript states. The assets’ spin through Hong Kong, the informant said, would ensure they stayed “out of reach of the U.S. government because, you know, it’s China, basically,” according to the transcript. “That is the big washing machine.”

In August, Shvartsman and the informant went to Carpaccio, a restaurant in the wealthy Miami Beach enclave of Bal Harbour, for what was perhaps their last secretly recorded lunch, according to the government’s transcript of the meeting.

Shvartsman pushed for details on the “full Singapore” process and a Swiss bank account. And the men agreed on a system of code words that Shvartsman could use, once the money was sheltered, to secretly send messages to the informant’s operatives over the phone: a “green” code to approve a transaction, and a “red” code if Shvartsman was facing an emergency or under investigative duress.

The “green” phrase was “How’s your girlfriend, Alexandra?” a transcript shows. Asked for a “red” phrase, Shvartsman responded, “Anything else.”

In November, a magistrate judge signed a warrant authorizing the seizure of Shvartsman’s bank account. A federal agent said the account contained roughly $15 million, though bank records cited in the seizure-warrant affidavit said it had reached as high as $44 million the month before.

Catherine Belton contributed to this report.