Last month, a major shareholder in a public company took to social media to complain that people — possibly short sellers — were spreading lies that could hurt his firm’s stock price.
“There are false, untrue and possibly illegal rumors,” the report said. “I sincerely request that the people who spread these false rumors or claims, and who may have done so in the past, be investigated immediately by the appropriate authorities.”
The Securities and Exchange Commission generally does not enforce shareholder orders on social media. But in this case, The poster was Donald Trumpwho is just weeks away from being inaugurated and receiving the authority to appoint the head of the SEC.
When Trump takes office in January, the president will for the first time become the majority owner of Trump Media, the publicly traded company that operates Truth Social. Former SEC officials are concerned about how Trump might try to use the agency to pursue enemies of his company, which accounts for more than half of his fortune. They also worry that the agency won’t be able to handle Trump Media if it runs afoul of securities laws.
Cases involving public companies with aggressive lawyers are difficult, “even if you don’t have a conflict of interest and a concern about not pissing off someone important,” said a current SEC enforcement official. “I don’t think anybody will say outright, ‘Don’t do that,’ but they’ll just say, ‘I could do something else.'”
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In Trump Media’s short history, it has had a combative relationship with the SEC, though it has never been charged with wrongdoing by the agency.
In 2022, when Trump Media tried to go public, which it did by merging with the company already sold, he threatened to sue the SEC over what he called “inexcusable obstruction” and “clear conflicts of interest among SEC officials and clear signs of political bias.” CEO Devin Nunes placed on the platform“NO MORE!” The company never sued.
The following year, the company that published Trump Media fraud charges dismissed with the SEC for $18 million after the agency found it had made misrepresentations in its filings. Neither does the SEC charged with insider trading against several people who invested in the deal.
Other previously undisclosed issues have raised concerns within the company that Trump Media may be violating securities laws by misleading investors, according to a person with knowledge of the company.
The company has long reported in its disclosure documents that it does not track key performance indicators for Truth Social.
In a securities filing, the company says it “currently and may never collect, monitor or report certain key operating metrics used by companies in similar industries,” such as the number of active users and ad views. This has always been a puzzling claim – much like how the broadcaster chose not to track ratings. Other public social media companies do track and the report such fundamental indicators of the success of their platforms.
But according to interviews and records reviewed by ProPublica, the company is tracking the numbers, and the number of active users is a tiny fraction of that of its competitors. ProPublica analyzed images of Truth Social’s internal employee dashboard from 2022 that show the company was tracking the number of active users. Internal communications from this year indicate that the practice has persisted.
According to experts, the SEC is investigating such discrepancies. Securities laws prohibit companies from knowingly misleading investors about information that is considered material to the value of the company’s stock.
In a statement, Trump Media accused ProPublica of “deliberately misrepresenting TMTG’s public records and the content of the stolen information” and relying on “unreliable people with known goals.” The statement also alleged that ProPublica “conspired with others to engage in market manipulation and fraud, and we will turn over evidence of this wrongdoing to the appropriate local, state and federal officials.” The company did not respond to a request to clarify what was “misrepresented.”
Although current and former SEC officials doubt the SEC will heavily regulate Trump Media, the company is relatively small. The agency’s oversight of companies owned by Trump associates will also be complicated and could have broader market implications. Elon Musk’s Tesla, for example, is more than a hundred times larger than Trump Media. Musk has fought the SEC fiercely for years. He settled a securities fraud case with the agency and later said “something broke with the SEC’s oversight.” After Musk became one of Trump’s most important financial backers, Trump appointed him to head a commission to identify what he sees as wasteful government spending.
Securities experts have warned that if the SEC fails to strictly regulate companies linked to the president or his allies, it could have disastrous consequences.
“When political power buys power for fraud, it is a problem not only for our politics, but also for our markets. It’s easier for American companies to get capital because there’s faith in how the American capital markets are regulated,” said Howard Fisher, an SEC attorney during 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. Presidents appoint the agency’s chairman, who heads a five-member commission that includes representatives from both parties. The agency’s nearly 5,000 employees report to the commission, doing its job of regulating the securities industry.
“How Much Influence Should the President Have in the Day-to-Day Operations of the SEC? There is no answer,” said Alison Herren Lee, a former Democratic SEC commissioner appointed during the first Trump administration.
The line between the SEC and the president on enforcement has been crossed before. Aides to President Richard Nixon put pressure on the SEC’s general counsel, G. Bradford Cook to exclude mention of the financier’s illegal contribution to the Nixon campaign from the SEC’s complaint against the executive branch. Nixon then appointed Cook as chairman of the SEC. But after the meetings with Nixon’s aides became known, Cook resigned as chairman, saying the agency’s “effectiveness may be diminished” because of perceived undue influence.
If Trump tries to make demands on the SEC, as he did in his Truth Social message calling for an investigation of short sellers, SEC officials will face a choice: either ignore the president and risk his wrath, or follow his orders and undermine their independence. Former SEC officials interviewed by ProPublica predicted a middle path in which the agency would not seriously investigate frivolous claims against a company’s enemies, but would claim it was doing so to satisfy him.
The co-director of the SEC’s enforcement division during Trump’s first term told ProPublica that he was not aware of any instances of Trump’s involvement in enforcement decisions during his first term.
“We haven’t had a problem with political interference,” said Stephen Peikin, who is now in private practice. “We investigated some significant political figures.”
The Trump-era SEC investigated former Rep. Chris Collins, a Republican Trump ally from New York who pleaded guilty to insider trading. Trump later pardoned him. The agency also investigated former North Carolina Republican Sen. Richard Burr for insider trading after the coronavirus stock market crash. (Behr said the case was dismissed.)
Still, during his first term, Trump has not shied away from asking the SEC to consider specific regulatory changes. In 2018, for example, he wrote on Twitter that after speaking with “some of the world’s top business leaders,” he asked the agency to consider allowing companies to stop filing quarterly reports and switch to biannual reporting.
“It was very unusual,” Lee, a former SEC commissioner, told ProPublica.
Trump’s SEC chairman at the time, Jay Clayton, said the agency was looking at “reporting frequency” before abandoning the idea months later.
Although Clayton was generally popular among SEC staff, his camaraderie with Trump, including several golfing sessions together, raised concerns about his independence.
In 2020, Clayton was – asked during hearings in the House of Representatives if he ever discussed SEC matters with Trump during their golf trips. “There are no conversations that I’ve had that have made me feel uncomfortable about my independence,” he said.
While the SEC investigates possible civil violations of the securities laws, the FBI and the Department of Justice must pursue criminal charges. Trump’s pick to head both of those agencies for his second term is tied to his social media campaign: FBI pick Cash Patel sits on the Trump Media board. Attorney General-elect Pam Bondi was identified in an April filing as owning a stake in the company worth more than $4 million at current prices. It is unclear whether she owns the shares. (Bondi did not respond to a request for comment.)
As federal authorities evade Trump Media scrutiny, securities experts said the void could be filled by state authorities over which Trump has no authority.
“I wouldn’t be surprised if we see blue state securities regulators open an investigation,” said Andrew Jennings, a law professor who teaches securities regulation at Emory University.
The New York attorney general has already joined the fray. Letitia James’ office is reviewing an emergency loan made to Trump Media before it went public from a trust linked to a Caribbean bank, according to records and a source with knowledge of the investigation.
last month, This is reported by the Financial Times that Trump Media is in talks to buy a crypto trading platform called Bakkt. If this deal goes through, it will be Trump’s second crypto venture after the September launch A token associated with Trump by a company called World Liberty Financial.
Trump’s crypto investments create another area of potential conflict of interest with the SEC, whose current Democratic chairman, Gary Gensler, has led an enforcement campaign against the crypto market, which he has called a rich fraud and scam.
On Wednesday, Trump announced his nominee for SEC chairman: Paul Atkins, the Bush-era SEC commissioner who has served as co-chair of the crypto defense group for the past seven years.
Crypto deregulation has been a theme of Trump’s campaign, with Trump saying at a crypto conference over the summer, “The regulations will be written by people who love your industry, not hate it.”
Do you have information about Trump Media that we should know? Robert Faturechi can be reached by email at (email protected) and via Signal or WhatsApp at 213-271-7217. Justin Elliott can be reached by email at (email protected) or via Signal or WhatsApp at 774-826-6240.
