Trump media firm sued by co-founders
Duo claims former president, others schemed to dilute their 8.6% share
The co-founders of former President Donald Trump’s media company filed a lawsuit Wednesday, claiming that Trump and other leaders had schemed to deprive 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 value Trump’s stake in the company at more than $3 billion, would offer the former president a financial lifeline at a time when he is facing more than $454 million in penalties from a civil fraud judgment last month in New York.
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 on the idea of a Trump-branded tech start-up and social media platform in early 2021 after he lost the White House and was banned from Twitter, now called X.
Trump agreed to the deal and was given 90% of the company, according to a motion for expedited proceedings filed Wednesday in the Delaware Court of Chancery by the co-founders’ partnership, United Atlantic Ventures. The partnership took 8.6%, while an attorney on the deal, Bradford Cohen, was given the remaining 1.4%, the motion states.
UAV launched the Trump Media business, hired employees and raised funding while receiving no “fee or payment for its work,” the motion said. And though Litinsky and Moss left Trump Media that year amid a dispute with its current leadership, UAV retained its shares, according to a Securities and Exchange Commission filing last month from Digital World.
The filing said that Trump was set to receive 78 million shares in the post-merger company — a stake worth $3.5 billion at today’s share price — and that UAV would receive more than 7 million shares, a stake worth about $339 million. “Throughout TMTG’s corporate history,” the motion states, “UAV’s 8.6 percent ownership interest has been recognized and honored.”
But UAV’s attorneys allege in the motion that Trump has recently attempted to “drastically dilute” the partnership’s stake as part of what they called an “11th hour, pre-merger corporate maneuvering” tactic designed to increase the amount of authorized stock, from 120 million shares to 1 billion shares.
UAV’s attorneys wrote that the “dilution scheme” had “no legitimate business purpose” and suggested that Trump and the Trump Media board planned to issue the new shares to “Trump and/ or his associates and children,” watering down UAV’s stake to less than 1%.
UAV was “promised 8.6 percent of this company and sadly its business partners are baselessly trying to renege,” said the partnership’s lead attorney, Christopher J. Clark of Clark Smith Villazor, in an interview with The Washington Post describing the lawsuit. “They feel like: We made Truth Social for you. You get 90 percent. But some people just aren’t 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 stepped down in August due to the possibility that he could be called to testify as a witness on Hunter Biden’s behalf.
In the filing, Digital World said the proposed issuing of 1 billion shares in “New Digital World” stock was part of a set of post-merger business changes. The SEC declared last month that the merger’s registration statement was effective, clearing the way for Digital World’s shareholders to vote to finalize the merger in a meeting this month.
Digital World acknowledged the UAV dispute in the SEC filing, saying it had received letters starting in January from a UAV lawyer asserting that the partnership still had the right to appoint directors to Trump Media’s board and to “approve or disapprove of the creation of additional TMTG shares.”
UAV, the filing said, argued that its original services agreement with Trump from 2021 remains in effect. Digital World said in the filing that the agreement was “declared void” by a Trump attorney “nearly two and a half years prior.”