Donald Trump’s SPAC deal may have violated securities laws, report says

Donald Trump’s recent venture into special purpose acquisition companies may have fallen afoul of securities laws, according to the New York Times.

The former president announced plans earlier this month to take his fledgling social media venture, Trump Media & Technology Group, public via a SPAC merger with Digital World Acquisition. The publicly traded shell company, which began trading on the Nasdaq in September under the ticker DWAC, subsequently saw its shares soar on the strength of robust investor interest, though the stock has since tapered off from its highs.

But on Friday, the Times reported that DWAC may have skirted securities regulations since its founder, Florida-based financier Patrick Orlando, had been in discussions with Trump over the SPAC merger for months in advance of DWAC’s public market debut in September. The publication cited people with knowledge of the talks between the two men, who said that Trump and Orlando—who has launched no fewer than three other SPACs on U.S. exchanges—had been discussing a SPAC merger as early as last March.

By law, SPACs aren’t supposed to have such a merger planned at the time of their IPO, and are instead meant to merge with a private company only after they’ve begun trading on a stock exchange. Otherwise, as the Times notes, it would be too easy for private companies to use SPACs as “backdoor vehicles” to go public without the level of public disclosure and scrutiny they would usually be exposed to through a traditional listing. Since SPACs are meant to function as empty shell companies at the time of their IPO, such public disclosures are deemed unnecessary.

Lawyers and securities industry officials told the Times that the discussions between Trump and Orlando could draw inquiries from the Securities and Exchange Commission—especially since DWAC’s securities filings repeatedly state that the company had not engaged in any “substantive discussions, directly or indirectly,” with a target company.

The SPAC merger is expected to raise hundreds of millions of dollars for Trump’s new social media venture. Meanwhile, Orlando and other DWAC backers are expected to see hundreds of millions more in proceeds as a result of the stock’s performance, the Wall Street Journal reported this week.

This story was originally featured on Fortune.com