Michael Shvartsman leaves after a hearing at Manhattan Federal Court in New York City, USA, July 20, 2023.
Amr Alfiky | Reuters
Prosecutors are asking a New York federal judge to sentence two brothers to years in prison for admitting insider trading in the securities of a blank-check company before it announced a planned merger Trump media.
Prosecutors want Florida venture capitalist Michael Shvartsman, who made more than $18 million in illegal trading profits, to be sentenced next Thursday to between 46 and 57 months in prison, a court filing shows.
And they want his brother Gerald Shvartsman to be sentenced to at least two years in prison for his illegal trade, which netted him $4.6 million.
The Florida furniture company's founder is scheduled to be sentenced Wednesday by the same Manhattan federal judge, Lewis Liman, who will sentence his brother.
Both men pleaded guilty in April.
Because of their criminal convictions, the brothers face possible deportation after they serve their sentences because they are not U.S. citizens.
Michael Shvartsman, 53, was born in Ukraine when it was still part of the Soviet Union. His family emigrated to Italy in 1974 and a year later to Toronto, Canada. Gerald Shvartsman, 47, was born in Canada.
Bruce Garelick walks after a hearing in Manhattan Federal Court in New York City on July 20, 2023.
Amr Alfiky | Reuters
A third defendant, Bruce Garelick, opted to go to trial and was convicted by a jury of insider trading in May.
Garelick, who is scheduled to be sentenced Nov. 7, faces a recommended sentence of between 108 months and 135 months under federal sentencing guidelines.
Garelick was chief strategy officer of Michael Shvartsman's Miami-based venture capital firm Rocket One Capital.
He became a director of Digital World Acquisition Corp. after the Shvartsman brothers were invited to invest in DWAC and another so-called special purpose acquisition company in 2021.
The brothers received nonpublic information from Garelick that Trump Media — whose majority owner is former President Donald Trump — was a potential merger target after they signed nondisclosure agreements.
Former U.S. President and Republican presidential candidate Donald Trump speaks during a campaign rally at the site of his first assassination attempt on October 5, 2024 in Butler, Pennsylvania.
Jim Watson | Afp | Getty Images
All three men purchased DWAC securities based on non-public information related to that action and then sold their shares after the stock price soared on news of the proposed merger with Trump's company, which owns the Truth Social app .
Garelick only earned $49,000 from the illegal business.
Trump Media's merger with DWAC was delayed until last March. The combined company will trade under the stock market ticker DJT.
The U.S. Attorney's Office in Manhattan said in a sentencing memorandum filed late Thursday that Michael Shvartsman's conduct was “blatant, manipulative and motivated by pure greed.”
The office's recommendation for his sentence is consistent with the recommendations of the federal sentencing guidelines.
Michael Shvartsman's defense attorneys, Alan Futerfas and Dennis Vacco, are urging Judge Liman to sentence him under these guidelines, citing his acceptance of responsibility in the case.
“Mr. Shvartsman paid a heavy price for his insider trading,” these lawyers wrote.
“He has lost his reputation and been humiliated both personally and professionally. He has suffered significant business losses through the loss of banking, credit cards, customers and suppliers,” the lawyers wrote. “His wife and children have suffered and his actions will continue to have enormous side effects, which in itself is a significant punishment.”
Prosecutors disclosed in the filing Thursday that Michael Shvartsman rented a $14.7 million yacht called Provocateur, which was agreed to be turned over to the federal government to obtain a money judgment, from him for summer charters in the Mediterranean, without the to notify the public prosecutor's office and that this had been the case since then, contrary to a court order, he was transferred to the Ligurian coast of Italy.
Prosecutors also said Shvartman failed to provide financial reports to the parole board ahead of his upcoming sentencing.
“Overall, Shvartsman exhibits a disturbing pattern of behavior as if he were above the law,” prosecutors wrote.
“The sentence imposed on Shvartsman and the period of supervised release must deter him from committing future crimes.”
Probation office officials are recommending that Michael Shvartsman be sentenced to 46 months in prison, apparently because he refused to provide the office with a personal financial report, his defense attorneys said.
Those lawyers noted in their ruling that the entire amount he owed, $18.2 million, was “paid” on Monday, so there is no reason to forfeit “Provocateur.”
Defense attorneys said they recommended Shvartsman not provide a financial report to the parole board, citing his Fifth Amendment right against self-incrimination.
These attorneys said the purpose of the personal financial statement is to determine whether a defendant is able to pay a fine.
But “there is no doubt that Mr. Shvartsman is capable of paying a fine,” the lawyers wrote, noting that he has already paid the confiscation ordered in the case.
The minimum sentence of two years in prison sought by prosecutors for Gerald Shvartsman is less than the 37 to 46 months recommended for him in these guidelines.
The probation office recommends that he be sentenced to one year and one day in prison.
“The defendant is a wealthy, successful businessman,” prosecutors wrote of Gerald Shvartsman, a married father of two.
“He reports an annual income of over $600,000 and resides in a waterfront villa of more than 6,000 square feet,” the filing states. “He had no need for these additional winnings. His involvement in this plan was driven by pure greed.”
But “The government agrees that the defendant is the least culpable of the three defendants sentenced by the court compared to his co-defendants,” prosecutors said in explaining their recommendation for Gerald Shvartsman.
Roland Riopelle, a lawyer for Gerald Shvartsman, is asking Liman to receive a non-prison sentence.
Instead, Riopelle asked the judge to sentence him to 18 months of house arrest.
The attorney wrote in his ruling that Gerald Shvartsman does not have $4.6 million in liquid assets to hand over, “therefore the court should simply enter a forfeiture judgment against him in that amount.”
Read more about CNBC's politics coverage
Riopelle wrote that if Gerald Shvartsman were given a lengthy prison sentence, there was “a very real chance” that his furniture company “will go bankrupt, leaving the over 150 employees and independent contractors who work there unemployed.”
The lawyer also noted Gerald Shvartsman's “significant health problems,” which included a “severe back injury,” Crohn's disease, two procedures to remove melanoma and “an acute and severe form of psoriasis requiring medication and a special light therapy device.”
Crohn's disease requires “close monitoring and regular treatment,” the file says.
Like Michael Shvartsman's lawyers, Riopelle said Gerald's possible deportation could harm his family.
“Judge Liman is a very serious and prudent judge and we hope that the assertion that the potential harm that will of course be caused to the minor parties who were not involved in this crime will convince the judge that the sentence we recommend is good,” said Riopelle in an interview.
Comments are closed.