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Last month, major shareholders of publicly traded companies complained on social media that people, likely short sellers, were spreading lies that could damage their stock prices.
“There are rumors that are false, untrue and possibly illegal,” the post reads. “I hereby call on those who spread these false rumors and statements, and those who may have done so in the past, to be immediately investigated by the appropriate authorities.”
The Securities and Exchange Commission typically does not accept marching orders from shareholders on social media. But in this case, the poster was Donald Trump, who will be inaugurated in just a few weeks and will have the power to appoint the head of the SEC.
When President Trump takes office in January, he will become, for the first time, a majority shareholder in Trump Media, the publicly traded company that operates Truth Social. Former SEC officials are concerned about how Mr. Trump will use the agency to go after his enemies, whose company accounts for more than half of his fortune. They also worry that the agency is unprepared to fight back if Trump Media violates securities laws.
A current member of the SEC’s enforcement division said cases involving publicly traded companies with aggressive lawyers are difficult “even if there is no conflict of interest or concern about offending key people.” “I don’t think anyone would explicitly say, ‘Stop,’ but they would say, ‘You can try another case.'”
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In Trump Media’s short history, the company has had a combative relationship with the SEC, but it has never been accused of wrongdoing by the agency.
In 2022, Trump Media, which had sought to go public through a merger with an already publicly traded company, sued the SEC for “inexcusable interference” and “obvious conflicts of interest and clear indications among SEC employees.” Threatened me. It’s because of political bias. ” CEO Devin Nunes posted on the platform, “NO MORE BS!” The company never filed a lawsuit.
The following year, the company that took Trump Media public settled fraud charges with the SEC for $18 million after the agency discovered it had made false statements in its filings. The SEC also charged several investors in the transaction with insider trading charges.
People familiar with the company say other previously unreported issues have raised internal alarm that Trump Media may be misleading investors and violating securities laws. .
The company has long reported in its disclosure filings that it doesn’t track Truth Social’s underlying performance numbers.
In its securities filing, the company states that it does not currently collect, monitor, or report certain key business metrics used by companies in similar industries, such as the number of active users or number of ad views, and will not collect or monitor them in the future. , there is nothing to report.” This has always been a puzzling claim, akin to television networks choosing not to track ratings. Other publicly traded social media companies also track and report on these basic measures of the success of their platforms.
But the company tracks that number and has only a fraction of its competitors’ active users, according to interviews and records reviewed by ProPublica. ProPublica examined images of the company’s internal Truth Social employee dashboard in 2022 that showed the company was monitoring the number of active users. Internal communications this year revealed that this practice continues.
Experts say the SEC investigates these types of discrepancies. Securities laws prohibit companies from intentionally misleading investors about information deemed material to stock prices.
In a statement, Trump Media accused ProPublica of “deliberately misrepresenting TMTG’s public documents and stolen information” and relying on “untrustworthy individuals with an ax to grind.” The statement also claimed that ProPublica “conspired with other companies to engage in market manipulation and fraud, and will submit evidence of this wrongdoing to the appropriate local, state, and federal authorities.” The company did not respond to requests for clarification on what was being “misrepresented.”
Current and former SEC officials have questioned the agency’s ability to aggressively regulate Trump Media, which is relatively small. The agency’s oversight of companies owned by Trump associates could also be difficult and have broader market implications. For example, Elon Musk’s Tesla is more than 100 times the size of Trump Media. Musk has been in a fierce battle with the SEC for years. He settled a securities fraud case with the agency and later declared that “something is wrong with the SEC’s oversight.” After Musk became one of Trump’s most important financial backers, Trump appointed him to head a committee that targets government spending he deems wasteful.
Securities experts warned that the SEC’s failure to aggressively regulate companies connected to the president and his allies could have dire consequences.
“If political power buys into the power of fraud, that’s a problem not only for politics but for markets as well. There is trust in the way American capital markets are regulated, which makes it easier for American companies to raise capital.” said Howard Fisher, who served as a trial attorney for the SEC during President Trump’s first term.
Created after the stock market crash of 1929, the SEC is part of the executive branch but operates independently of the White House. The president appoints the agency’s chairman, who heads a five-member commission that includes members of both parties. The agency’s approximately 5,000 employees report to the commission in conducting securities industry regulatory work.
“How much influence is the president supposed to have on the day-to-day operations of the SEC? The answer is none,” said former Democratic SEC Commissioner Alison Herren Lee, who was appointed under the first Trump administration. he said.
There have been times when lines have been crossed between the SEC and the president regarding enforcement actions. President Richard Nixon’s aides pressured SEC General Counsel G. Bradford Cooke to remove references to illegal financier contributions to the Nixon campaign from the SEC’s complaint against the executive. Nixon then made Cook chairman of the SEC. However, after it was revealed that he had had meetings with President Nixon’s aides, Cook resigned as chairman, citing what he perceived as undue influence and saying that “the effectiveness of the government agency could be impaired.” did.
If President Trump seeks enforcement from the SEC, as he did in his Truth Social post calling for an investigation into short sellers, SEC officials will have to make a choice. Either ignore the president and risk his wrath, or follow his orders and undermine their policies. Independence. Former SEC officials interviewed by ProPublica predicted a middle ground in which the SEC would not seriously investigate unsubstantiated allegations against adversaries, instead claiming they were doing so to satisfy the SEC.
The co-head of the SEC’s enforcement division during President Trump’s first term told ProPublica that he was unaware of any instances in which Trump was involved in enforcement decisions during his first term.
“There was no problem with political interference,” said Stephen Peikin, now in private practice. “We investigated some important political figures.”
During the Trump administration, the SEC investigated former Rep. Chris Collins, a New York-based Republican Trump ally, who pleaded guilty to insider trading. Trump later pardoned him. The agency also investigated former North Carolina Republican Sen. Richard Burr on suspicion of insider trading after the coronavirus-induced stock market crash. (Barr said the suit was ultimately dropped.)
Still, during his first term, President Trump did not hesitate to ask the SEC to consider specific regulatory changes. For example, in 2018, after speaking with “some of the world’s top business leaders,” he urged government agencies to consider allowing companies to stop filing quarterly reports and move to bi-annual reporting. I tweeted that I did.
“This was very unusual,” Lee, a former SEC commissioner, told ProPublica.
Jay Clayton, President Trump’s SEC chairman at the time, rejected the idea several months later, saying the SEC was considering “reporting frequency.”
Creighton was generally popular among SEC officials, but his close friendship with President Trump, including multiple rounds of golf together, raised concerns about his independence.
In 2020, Clayton was asked during a House hearing whether he had ever discussed SEC matters with Trump during a golf outing. “There has never been a conversation that I have had that in any way made my independence uncomfortable,” he testified.
The SEC is investigating possible civil violations of securities laws, but it is up to the FBI and Justice Department to pursue a criminal case. President Trump’s picks to head both of these agencies during his second term have ties to his social media companies. Kash Patel, an FBI appointee, is a member of Trump Media’s board of directors. Attorney General-elect Pam Bondi revealed in an April filing that she owns more than $4 million worth of company stock at current prices. It’s unclear whether she still owns any shares. (Bondi did not respond to a request for comment.)
Securities experts said if federal authorities avoid scrutiny of the Trump media, state authorities over which Trump has no authority could fill the void.
“I wouldn’t be surprised if blue state securities regulators launch an investigation,” said Andrew Jennings, a law professor who teaches securities regulation at Emory University.
New York’s attorney general has already joined the fray. Letitia James’ office is investigating an emergency loan provided to Trump Media before it went public from a trust tied to a Caribbean bank, records and investigators said.
Missouri voters put abortion rights on the table. Republican lawmakers are already working to repeal it.
Last month, the Financial Times reported that Trump Media was in talks to buy the cryptocurrency exchange Bakkt. If the deal goes through, it would be Trump’s second crypto venture, after a company called World Liberty Financial launched a Trump-related token in September.
President Trump’s investments in cryptocurrencies create yet another area of potential conflict of interest with the SEC. Gary Gensler, the current Democratic chairman of the SEC, led an enforcement campaign against the cryptocurrency market, which is rife with fraud and scams.
On Wednesday, President Trump announced his nominee for SEC chairman: Paul Atkins, a Bush-era SEC commissioner who has served as co-chair of a cryptocurrency advocacy group for the past seven years.
Cryptocurrency deregulation has been a theme of the Trump campaign, with Trump saying at a crypto conference in the summer, “The rules will be written by people who love your industry, not people who hate your industry.” he said.
Is there anything I should know about Trump Media? Robert Faturechi can be reached at: [email protected] Contact us via Signal or WhatsApp (213-271-7217). Justin Elliott can be reached via email at: [email protected] Or contact us via Signal or WhatsApp at 774-826-6240.
