What changed in this filing

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Item 1. Legal Proceedings

2023-11-13 compared with 2022-11-21 · 29 added, 28 removed, 2 unchanged (97% of the section changed)

Legal Proceedings.

We are cooperating with a Financial Industry Regulatory Authority, Inc.

(“FINRA”) inquiry concerning events (specifically, a review of trading) that preceded the public announcement of the Merger Agreement.

Except as indicated below, to the knowledge of our management team, there is no litigation currently pending or contemplated against us, or against any of our property.

We are cooperating with a FINRA inquiry concerning events (specifically, a review of trading) that preceded the public announcement of the Merger Agreement.

According to FINRA’s request, the inquiry should not be construed as an indication that FINRA has determined that any violations of Nasdaq rules or federal securities laws have occurred, nor as a reflection upon the merits of the securities involved or upon any person who effected transactions in such securities.

We are also cooperating with an SEC investigation, including responding to several document requests and subpoenas from the SEC to us and certain of our directors seeking various documents and information regarding, among other things, meetings of our Board of Directors;

communications with and the evaluation of potential targets, including TMTG;

communications relating to TMTG;

agreements with and payments made to certain advisors;

investors, including investor meetings and agreements;

the appointment of certain of our officers and directors;

policies and procedures relating to trading;

and documents sufficient to identify banking, telephone, and email addresses;

our due diligence regarding TMTG, communications regarding and due diligence of potential targets other than TMTG;

and relationships between and among Digital World (and/or certain of Digital World’s officers and directors) and other entities (including the Sponsor and certain advisors, including Digital World’s underwriter and financial advisor in its Initial Public Offering).

According to the SEC’s request and subpoena, the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of us or any person, entity, or security.

Any resolution of the inquiry or investigation, as well as proceedings by the SEC, FINRA, or other governmental or regulatory authorities, could result in the imposition of significant fines, penalties, injunctions, prohibitions on the conduct of our business, damage to our reputation and other sanctions against us, including restrictions on our activities.

The SEC also issued an order of examination pursuant to Section 8(e) of the Securities Act, with respect to the Form S-4 relating to the Transactions with TMTG, and a further subpoena in support thereof.

This subpoena seeks additional documents and information with respect to, among other things, communications regarding and due diligence of potential targets other than TMTG, relationships between and among Digital World (and/or certain of Digital World’s officers and directors) and other entities (including the Sponsor) and certain advisors, including Digital World’s underwriter and financial advisor in its Initial Public Offering), the holders of ownership interests in the Sponsor, certain elements of the transaction history for equity in the Sponsor, and certain forward-looking information about TMTG referenced in the Form S-4.

Any resolution of the investigation could result in the imposition of significant penalties, injunctions, prohibitions on the conduct of Digital World’s business, damage to its reputation and other sanctions against Digital World.

In addition, the Section 8(e) order of examination of the Form S-4 can be expected to delay effectiveness of the Form S-4, which could materially delay, materially impede, or prevent the consummation of the Transactions.

In addition, Digital World and each member of its board of directors received grand jury subpoenas seeking certain of the same documents demanded in the above-referenced SEC subpoenas, along with requests relating to Digital World’s S-1 filings, communications with or about multiple individuals, and information regarding Rocket One Capital.

Digital World has been informed that on June 27, 2022 TMTG received a subpoena from the SEC seeking documents relating to, among other things, Digital World and other potential counterparties for a business transaction involving TMTG.

Digital World has also been informed that on June 30, 2022, TMTG was served with a subpoena, issued by a federal grand jury sitting in the Southern District of New York, seeking a subset of the same or similar documents demanded in subpoenas to Digital World and its directors.

Certain current and former TMTG personnel have also recently received individual grand jury subpoenas.

These subpoenas, and the underlying investigations by the SEC and the U.S.

Department of Justice, can be expected to delay effectiveness of the Form S-4, which could materially delay, materially impede, or prevent the consummation of the Transactions.

Lee Jacobson was previously the Chief Executive Officer of Apmetrix, Inc., a Delaware corporation.

Apmetrix, Inc.

was an enterprise data management company that had a dispute with its licensor over the adequacy of the technology being licensed and the corresponding royalty payments, ultimately filing a bankruptcy petition that began on December 15, 2016 and terminated on December 13, 2019.

To the knowledge of our management, with the exception of the above disclosure, there is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.

On October 20, 2023, Robert Lowinger (the “Plaintiff”) filed a complaint against Rocket One Capital, LLC (“Rocket One”), Michael Shvartsman, Bruce Garelick, and the Company in the U.S.

District Court for the Southern District of New York.

According to the complaint, the Company has been named as a party in the lawsuit because the Plaintiff is seeking relief for the benefit of the Company.

In the complaint, the Plaintiff contends that, in 2021, Mr.

Garelick and Rocket One were directors of the Company and that they purchased securities of the Company.

The Plaintiff further alleges that within a six-month period from the date of their purchases, both Mr.

Garelick and Rocket One sold securities in the Company and realized profits from those sales.

Additionally, the Plaintiff alleges that Mr.

Shvartsman had a financial interest in the profits resulting from Rocket One’s purchases and sales of the Company’s securities.

According to the Plaintiff, under Section 16(b) of the Exchange Act (15 U.S.C.

§78p(b)), Rocket One, Mr.

Shvartsman, and Mr.

Garelick are each required to disgorge certain trading profits to the Company.

As of the date of this report, the Company has not filed a response to the complaint.

The case is Lowinger v.

Rocket One Capital, LLC, et al., No.

1:23-cv-9243 (S.D.N.Y.

Settlement in Principle

As previously disclosed in the Company’s Form 8-K filed with the SEC on July 3, 2023, the Company was the subject of an investigation (the “Investigation”) by the SEC with respect to certain statements, agreements and the timing thereof included in the Company’s registration statements on Form S-1 (the “Form S-1”) in connection with its IPO and Form S-4 relating to the business combination between the Company and TMTG.

On July 3, 2023, the Company reached an agreement in principle (the “Settlement in Principle”) in connection with the Investigation.

The Settlement in Principle was subject to approval by the SEC.

On July 20, 2023, the SEC approved the Settlement in Principle, announcing settled charges against Digital World and entered a cease-and-desist order (the “Order”) finding that Digital World violated certain antifraud provisions of the Securities Act and the Exchange Act, in connection with Digital World’s IPO filings on Form S-1 and the Form S-4 concerning certain statements, agreements and omissions relating to the timing and discussions Digital World had with TMTG regarding the proposed business combination.

In the Order, Digital World agreed (i) that any amended Form S-4 filed by Digital World will be materially complete and accurate with respect to certain statements, agreements and omissions relating to the timing and discussions that Digital World had with TMTG regarding the proposed business combination and (ii) to pay a civil money penalty in an amount of $18 million to the SEC promptly after the closing of any merger or a comparable business combination or transaction, whether with TMTG or any other entity.

Section 5.2 of the Merger Agreement provides that without the prior written consent of TMTG (such consent not to be unreasonably withheld, conditioned or delayed) the Company shall not settle or compromise any claim, action or proceeding, including any suit, action, claim, proceeding or investigation relating to the Merger Agreement or the transactions contemplated thereby, in excess of $100,000.

As such, the Company has kept TMTG appraised of the discussions with the SEC and the Settlement in Principle.

Nevertheless, TMTG is not a party to the Settlement in Principle or any related negotiation and it has not provided its consent to such settlement.

Although the Company believes that it has complied with Section 5.2 of the Merger Agreement, TMTG may disagree and try to terminate the Merger Agreement.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings