Legal expert: Trump's dealings with Truth Social merger may have violated the law

In a deep dive into the struggles that Donald Trump's Truth Social is experiencing, the Guardian's Chris McGreal reports that an investigation into illegal stock trading may be warranted according to a law professor who has been taking a look at how the deal is falling apart.

The social media platform that grew out of the former president's banishment from Twitter after the Jan. 6 insurrection has run into major difficulties, from gaining followers -- approximately 4 million compared to 80 million for Twitter -- to raising money it needs to continue on.

As McGreal reports, the future of the company is under a cloud because it has "run into trouble as more than a billion dollars in investment has stalled amid shareholder hesitation and a federal investigation into whether Trump Media and Technology Group broke the law in its dealings with a company set up to provide the money."

According to New York University law professor, Michael Ohlrogge, "who specializes in the kind of funding Trump is now seeking," there are serious red flags that should alarm any investors.

"There’s a lot of questions about whether this a viable business. Is it actually going to make any money? There’s plenty of good reasons to doubt that. It’s pretty obvious that this was just this thing that he slapped together very quickly,” Ohlrogge explained.

In particular he cast a wary eye at the Digital World Acquisition Corp SPAC created with the intent of funding Trump Media.

According to the Guardian, "Digital World Acquisition Corp was created as a Spac a year ago without any commitment to invest in Trump’s media business. Shareholders gambled that their investment would increase in value when Digital World found a company to merge with. That’s exactly what happened when the deal with Trump Media was announced just seven weeks later, driving the price of Digital World’s shares up tenfold."

However, now that shareholders have balked at approving the merger, Ohlrogge suggests the SEC may have some questions during the delay.

As the Guardian reported, "Ohlrogge said that the SEC is likely to be looking at whether Trump sealed an agreement, or came close, with Digital World before the Spac began selling shares without telling potential investors, in breach of financial regulations."

For his part, Ohlrogge explained, "If they were already in advanced talks with Trump’s Spac and didn’t tell that to the initial investors, then that could be a relatively clear violation of the securities laws. There’s relatively good reason to suspect that may have been the case."

The report adds that Digital World’s share price has plummeted from $100 to approximately $23."