The co-founders of former President Donald Trump's media company filed a lawsuit Wednesday, alleging that Trump and other executives plotted to strip them of a stake in the company that could be worth hundreds of millions of dollars.
The case could complicate a long-delayed bid by Trump Media & Technology Group, owner of the social network Truth Social, to merge with a special purpose acquisition company called Digital World Acquisition and become a publicly traded company.
That merger deal, which could increase the value of Trump's stake in the company to more than $3 billion, would provide the former president with a financial lifeline if he faces penalties of more than $2 billion in a civil fraud ruling in New York this month There is a threat of $454 million.
Representatives for Trump, Trump Media and Digital World did not immediately respond to requests for comment.
Andy Litinsky and Wes Moss, who met Trump as contestants on his reality show “The Apprentice,” pitched Trump the idea of a Trump-branded tech start-up and social media platform in early 2021 after he White House had lost and was banned from Twitter, now called X.
Trump agreed to the deal and received 90 percent of the company, according to a motion for expedited proceedings filed Wednesday in the Delaware Court of Chancery by co-founder partnership United Atlantic Ventures. The partnership received 8.6 percent, while an attorney on the deal, Bradford Cohen, received the remaining 1.4 percent, the filing said.
UAV launched the Trump Media business, hired employees and raised funding without receiving “a fee or payment for its work,” the filing said. And although Litinsky and Moss left Trump Media this year due to a dispute with current leadership, UAV retained its shares, according to a Securities and Exchange Commission filing this month by Digital World.
The filing said Trump would receive 78 million shares of the post-merger company – a stake worth $3.5 billion at today's stock price – and that UAV would receive more than 7 million shares, a stake in the Worth around $339 million. “Throughout TMTG’s corporate history,” the application states, “UAV’s 8.6 percent ownership interest has been recognized and honored.”
But UAV's lawyers allege in the filing that Trump recently attempted to “drastically dilute” the partnership's stake as part of a tactic they described as “eleventh-hour pre-merger corporate maneuvering” to increase the amount authorized shares to increase from 120 million shares to 1 billion shares.
UAV's lawyers wrote that the “dilution plan” had “no legitimate business purpose” and suggested that Trump and Trump Media's board planned to issue the new shares to “Trump and/or his employees and children,” thereby reducing the stake of UAV would be reduced to less than 1 percent.
UAV was promised “8.6 percent of this company, and unfortunately its business partners are baselessly trying to deny that,” said the partnership's lead attorney, Christopher J. Clark of Clark Smith Villazor, in an interview with The Washington Post in which he the lawsuit described. “You have the feeling: We made Truth Social for you. You get 90 percent. But some people are just not happy with 90 percent.”
Clark has represented high-profile defendants including Hunter Biden, Elon Musk and billionaire businessman Mark Cuban. After representing President Biden's son for several years in negotiations related to a Justice Department investigation, Clark resigned in August amid the possibility that he could be called as a witness on Hunter Biden's behalf.
In the filing, Digital World said the planned issuance of 1 billion shares of “New Digital World” stock is part of a series of business changes following the merger. The SEC declared this month that the merger's registration statement was effective, clearing the way for Digital World shareholders to vote to complete the merger at a meeting next month.
Digital World acknowledged the UAV dispute in the SEC filing and said it had received letters from a UAV attorney since last month claiming that the partnership still had the right to appoint directors to Trump's board Media to appoint and “approve or disapprove the creation of additional TMTG.” Shares.”
UAV argued in the filing that its original 2021 services agreement with Trump remains in effect. Digital World said in the filing that the agreement was “nullified” by a Trump lawyer “nearly two and a half years earlier.”
Digital World said in the filing that Trump Media stated that it “strongly disagrees with UAV's assertion of rights with respect to TMTG under the Services Agreement and that it believes that TMTG has effective defenses against UAV's potential claims.” .”
The filing said a UAV representative sent a text message to a Trump Media bondholder this month suggesting that UAV might try to “order” or block the merger. The filing also noted that a UAV attorney had sent Trump Media a letter recommending “legal action regarding UAV's purported rights to TMTG, including, if necessary, a lawsuit to order” the merger threatened.
Digital World said in the filing that the litigation could prevent or delay the merger agreement, “materially adversely affect” the company's future performance or “negatively impact investor confidence and market perception.”
Delaware, where Trump Media is incorporated, is a common state for American corporate registrations, and its chancery court is a mainstay for corporate litigation.
A sealed legal complaint was filed in the case late Wednesday. Under Delaware's chancellor law, it won't be released for another five days as both sides discuss possible redactions. A copy of the motion for expedited processing outlining the dispute was publicly available in court records.