Litigation Releases (Patrick Orlando)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26051 / July 19, 2024

Securities and Exchange Commission v. Orlando, Civil Action No. 1:24-cv-2097 (D.D.C. filed July 17, 2024)

SEC Charges Former SPAC CEO with Fraud

On July 17, 2024, the Securities and Exchange Commission filed a complaint in federal court in the District of Columbia alleging that Patrick Orlando, the former CEO and Chairman of Digital World Acquisition Corporation ("DWAC"), a special purpose acquisition company ("SPAC"), made materially false and misleading statements in forms filed with the SEC as part of DWAC's initial public offering ("IPO") in September 2021 and its proposed merger with Trump Media & Technology Group Corp. ("TMTG"), which was announced in October 2021.

A SPAC is a company with no underlying business operations that raises capital through an IPO for the purpose of acquiring an unidentified private company. SPAC investors rely on the SPAC's management to expend efforts to identify and acquire or combine with a private operating company. Accordingly, a SPAC must inform investors, clearly and accurately, about steps it is takes to acquire a company, such as pre-IPO discussions or negotiations.

As alleged in the complaint, Orlando initially pursued a merger with TMTG on behalf of another SPAC of which he was CEO. However, because of opposition from two directors and one officer of that SPAC, Orlando formed a plan in Spring 2021 to instead pursue a merger between DWAC, which had not yet had its IPO, and TMTG. The complaint alleges that Orlando chose DWAC in part because he owned a larger percentage of DWAC than of the other SPAC and would make more money by pursuing the deal with DWAC. According to the complaint, Orlando subsequently became CEO of DWAC and had lengthy discussions with representatives of TMTG about the proposed merger. Nonetheless, leading up to DWAC's IPO, Orlando allegedly signed multiple public filings that falsely stated that DWAC did not intend to merge with any specific company and that DWAC and its officers and directors had not had any discussions with potential target companies prior to the IPO.

The SEC's complaint charged Orlando with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, an officer-and-director bar, and a civil penalty.

The SEC's investigation was conducted by Andrew McFall, David Bennett, Darren Boerner, and Patrick McCluskey of the Market Abuse Unit and Lindsay S. Moilanen, Beth Baier, Matt Lambert, and Hermann Vargas of the New York Regional Office. The case was supervised by Joseph Sansone of the Market Abuse Unit and Thomas P. Smith, Jr. of the New York Regional Office. The SEC's litigation is being led by John Timmer and Mr. McFall and supervised by Melissa Armstrong.