- Investors accuse Florida businessman Patrick Orlando of diverting millions of shares of Trump Media from them.
- Orlando was the CEO of the blank check firm that helped launch Trump Media.
- The plaintiffs say in a lawsuit that Orlando “engaged in malicious and intentional self-dealing.”
Investors have accused the former CEO of the blank check firm that helped the parent company of President-elect Donald Trump’s social media site to squeeze them out of millions of shares.
The plaintiffs — more than three dozen investors — allege in a new lawsuit against Florida businessman Patrick Orlando that he “engaged in malicious and intentional self-dealing of monumental proportions to the tune of potentially hundreds of millions of dollars” by diverting assets to himself and his family through entities including an offshore shell company.
The plaintiffs say in the lawsuit that they are founding members of Orlando entity ARC Global Investments II, the sponsor of a SPAC that merged with Trump Media & Technology Group to take it public earlier this year. Orlando was CEO and Chairman of SPAC, Digital World Acquisition Corporation.
The suit, filed Tuesday in Delaware Court of Chancery, alleges that Orlando and ARC Global have failed to transfer what they are owed — roughly 75% to 80% of the roughly 8.1 million shares in Trump Media that ARC Global owns. – to the plaintiffs. .
Trump Media is the operator of Trump’s social media platform, Truth Social.
Orlando, his lawyers and ARC Global’s attorneys did not immediately respond to requests for comment from Business Insider on Thursday.
The lawsuit accuses the defendants of “coordinated and intentional stock theft” and “serious breaches of fiduciary duties” by Orlando.
Orlando, the suit alleges, “orchestrated a scheme with the other defendants to divert most of the ownership interest in ARC to himself and his family through an alter-ego entity called Franlu LLC” and an entity based in Cayman Islands called Belsize Ventures Ltd. Franlu and Belsize are also defendants in the suit.
“In doing so, Orlando willfully breached its fiduciary duties owed to plaintiffs by diluting plaintiffs’ ownership interests,” the lawsuit states. “Specifically, as Managing Member of ARC, Orlando conveyed approximately 46% of ARC’s membership interest to Franlu in a secret transaction for zero consideration in return.”
The suit alleges that ARC Global is returning shares to Orlando and his “inner circle” and “liquidating the remaining shares to fund Orlando’s own legal defense efforts and other personal expenses on a commingled basis with its own assets ARC”.
“While claiming that ARC was unable to distribute shares, Orlando has enriched himself through a series of luxury purchases, including a new six million dollar home in Miami, from the proceeds of the TMTG stock he appropriated. the lawsuit claims.
To date, the plaintiffs have received only a “slight fraction” of the Trump Media stock they say they are owed to ARC Global under the terms of their subscription agreements, the suit says.
The merger that allowed Trump Media to trade below the DJT stock price was completed in March, with the lock-up period ending in September, the lawsuit said.
“Even assuming that the lock-up period stood as a bar to the plaintiffs from obtaining their founder shares, the lock-up period ended more than a month ago,” the suit states.
The suit says that in September, Orlando sent emails to members of ARC Global, including the plaintiffs, “claiming that “ARC has issues that need to be addressed before capital distributions can be made.”
“As examples, Orlando listed several “liabilities of ARC,” including “good faith creditors, such as professional advisors or recordkeepers, and costs imposed on ARC through litigation,” the lawsuit states.
The lawsuit says Orlando emailed ARC Global members back in October “stating that”[i]initial distributions [were] in progress, but that “further releases” are expected only “in the future.”
“Orlando’s email again alludes to ‘attacks’ on ARC and the need to ‘protect itself’, without providing any explanation of how such ‘attacks’ affect ARC’s ability to tender to subscribe investors their TMTG shares,” the lawsuit continues.
The Securities and Exchange Commission sued Orlando in July, alleging that he “falsely represented” that his blank check company, Digital World Acquisition Corp., had no intention of merging with any specific company.
“Orlando knew these statements were false because he had personally engaged in numerous lengthy discussions with representatives of Trump Media & Technology Group Corp,” the SEC said in the lawsuit.
The group of investors who filed the latest lawsuit against Orlando are seeking to recover their “fair share” of 8.1 million shares of stock, “rescind the improper transactions” and monetary damages.
Shares of Trump Media rose 5.9% on Wednesday after Trump defeated Vice President Kamala Harris in the presidential election, but fell 23% on Thursday, closing at $27.70.