A former nominee for director of the so-called blank-check company that plans to merge with former President Donald J. Trump’s social media start-u
A former nominee for director of the so-called blank-check company that plans to merge with former President Donald J. Trump’s social media start-up is suing, claiming he was frozen out of the deal.
Brian Shevland, the former nominee, is seeking monetary damages over what his suit calls a “brazen act of fraud.”
The lawsuit, which is aimed at the chief executive of Digital World Acquisition Corp., the special purpose acquisition company that raised nearly $300 million for the merger, was filed in Miami federal court on Tuesday. Mr. Shevland, who runs his own investment management firm, says that he only found out that he was no longer a nominee for the company’s board when Patrick Orlando, Digital World’s chief executive, filed a document with the Securities and Exchange Commission that no longer included his name.
The lawsuit says the unexplained removal from the filing in August, a month before the Digital World’s initial public offering, “cemented the freeze-out” of Mr. Shevland, who said he was owed 7,500 shares of Digital World and was deprived of his right to buy more shares at a low price. The suit says Mr. Orlando also broke a commitment to involve Mr. Shevland in other SPACs.
In the lawsuit, Mr. Shevland claims he was “instrumental” in securing the deal with Trump Media & Technology Group and raising capital for Digital World.
The lawsuit does not provide much detail about the role Mr. Shevland, the chief executive office of Bluestone Capital Management, played in the merger talks. But it does confirm reporting by The New York Times that Mr. Orlando and his colleagues were in talks with representatives of Trump Media earlier this year.
Digital World last week disclosed that the Securities and Exchange Commission had opened an investigation into the events surrounding its communications with Trump Media. When acquisition companies, which are known as SPACs, go public, they are not supposed to already have merger target in sight. Digital World had said in its filings that it had not engaged in any discussions with any potential merger targets before its initial public offering in September.
The Financial Industry Regulatory Authority is looking into trading in Digital World securities before the announcement of the deal on Oct. 20.
A lawyer for Mr. Shevland declined to comment beyond the lawsuit. Mr. Orlando did not immediately respond to a request for comment.
The lawsuit says that when some people associated with Mr. Orlando had initially objected to doing a deal with Trump Media for “personal reasons,” Mr. Shevland pushed for a reconsideration of the issue.
“Shevland reminded Orlando that their obligation was to ignore personal beliefs and instead to maximize shareholder value,” the lawsuit says. “Due to Shevland’s efforts, a second vote was held whereby T.M.T.G. ultimately was chosen as an appropriate SPAC merger candidate.”
The lawsuit does not specify when those votes were held.
Digital World and Trump Media disclosed last week that they had raised an additional $1 billion from investors to finance the merger. In a regulatory filing on Wednesday, Digital World said 36 unnamed investors had committed money to the private placement or private investment in public equity.
The company also disclosed that an affiliate of E.F. Hutton, the investment bank pitching the deal to investors, will receive a $25 million sales commission.
www.nytimes.com