Truth Social Founders Allege Trump Tried to ‘Renege’ on Company Stake

Controversy continues to surround Truth Social, the fledgling social media platform launched by former President Donald Trump and his allies to counter what they see as censorship on larger platforms like Twitter.

A recent report in The Washington Post details allegations from three individuals involved in starting Truth Social that Trump and his representatives sought to renege on the original agreement that gave Trump Media and Technology Group a controlling stake in the company.

Truth Social Founders Claim Trump Tried to Renege

According to documents filed in the Delaware Chancery Court, the co-founders of Trump Media and Technology Group (TMTG), Andy Litinsky and Wes Moss, allege that former President Donald Trump engaged in a “dilution scheme” to deprive them of their shares in the company.

Originally, Trump held 78 million shares in TMTG, equal to 90% of the company, while Litinsky and Moss’s partnership with United Atlantic Ventures (UAV) held 7 million shares, amounting to 8.6%.

Merger and SPAC Deal at Risk

The legal dispute threatens to derail TMTG’s plans to complete a merger with Digital World Acquisition Corp., a special purpose acquisition company (SPAC), and become a publicly traded company.

The SPAC warned that the lawsuit could “significantly impact” the merger and “negatively impact investor confidence.” The merger deal values Trump’s stake in TMTG at over $3 billion, offering him a much-needed financial lifeline as he faces $454 million in penalties from a civil fraud judgment.

Origin of Relationship and Bitter Falling Out

Litinsky and Moss initially pitched the idea of a Trump-branded tech company to Trump after he left the White House and was banned from major social networks.

The legal action by UAV adds to the turmoil surrounding TMTG and Digital World this week. Digital World and TMTG sued Digital World’s former CEO, Patrick Orlando, and sponsor Arc Global Investments II, accusing Orlando of threatening to block the merger unless he received the money.

How Truth Social Came to Be

Truth Social was founded in early 2021 by former President Donald Trump and two of his associates from the television show “The Apprentice,” Wes Moss and Andy Litinsky.

Initially, Trump agreed to give himself 90% of the company’s shares, while Moss and Litinsky’s partnership, United Atlantic Ventures (UAV), received 8.6% of the shares. The remaining 1.4% went to an attorney involved in the deal, Bradford Cohen.

Background on The Lawsuit Against Trump Filed By Truth Social Co-Founders

The lawsuit alleges that Trump and TMTG executives engaged in a scheme to deprive Litinsky and Moss of their 8.6% stake in the company, which the plaintiffs value at $4 billion.

Litinsky and Moss originally met Trump while competing as contestants on his reality television show, “The Apprentice.”

Accusations of Dilution Scheme

According to the lawsuit, Trump and TMTG executives later engaged in a “dilution scheme” to decrease UAV’s stake to less than 1%. The scheme involved increasing TMTG’s total shares from 78 million to 1 billion, with the new shares distributed to Trump and his family members.

The plaintiffs allege this maneuver had “no legitimate business purpose” and was designed solely to deprive them of their stake.

Implications for the Merger

The merger, if approved by shareholders, would make TMTG a publicly traded company and provide Trump with a financial lifeline.

However, UAV has threatened to block the merger in response to the alleged dilution scheme. The lawsuit is one of three filed this week exposing internal power struggles within TMTG that could undermine confidence in the merger.

Impact and Implications of The Lawsuit

The lawsuit could hamper TMTG’s long-delayed bid to merge with Digital World Acquisition Corp., a special purpose acquisition company, and become a public company.

The lawsuit is one of three filed this week detailing disputes among key figures in TMTG’s early days. The cases will likely spark legal battles ahead of the March shareholder vote on the merger.

What This Means for the Future of Truth Social

The litigation against TMTG and its leadership could significantly impact the company’s prospects. If the plaintiffs are successful in their bid to block the merger between TMTG and Digital World Acquisition, it may hinder TMTG’s ability to become a publicly traded company.

This would deprive TMTG of the crucial funding required to scale its operations and platform. TMTG’s financial stability is already precarious, given its reliance on the merger to raise capital.

A Deterrence For Potential Investors

The legal dispute introduces further uncertainty that may deter potential investors and partners. Supporters of the platform believe it provides a space for free speech, but its association with increasingly polarizing political figures could limit its appeal.

The litigation also threatens to damage TMTG’s reputation, which the plaintiffs allege has already been harmed by the actions of its leadership.

Trump’s Defense Response to the Allegations

Following the lawsuit filed against him by his former business partners, Litinsky and Moss, Trump has asserted his innocence. According to statements posted on Truth Social, Trump claims that the allegations brought against him are “baseless and meritless.”

He maintains that there was “no dilution scheme” and that the increase in shares was done to raise capital for the company, as is standard business practice.

Trump Majority Shareholder Card

Trump further argues that as the majority shareholder, holding 90% of the company’s shares, he has the authority to make decisions to benefit TMTG.

The additional shares were distributed to attract new investors and raise funds to support TMTG’s growth, including developing new features on Truth Social and global expansion, not for his gain.

What’s Next for Truth Social?

Truth Social, the social media platform founded by former President Donald Trump, faces an uncertain future. The company is embroiled in legal disputes that threaten to delay its plans to become a publicly traded company through a merger with Digital World Acquisition Corp.

According to recent legal filings, two of Truth Social’s co-founders, Wes Moss and Andy Litinsky, are suing Trump and other Truth Social executives, alleging that the company schemed to deprive them of shares in Truth Social that could be worth hundreds of millions of dollars.

An Added Layer of Challenges

The legal disputes add to existing challenges for Truth Social. The social network faces competition from alternative platforms popular with conservatives and has struggled to attract a large user base. Truth Social’s CEO recently resigned, citing the company’s “many challenges.”

The future of Truth Social remains unclear. If the company is unable to resolve its legal issues and complete a merger with Digital World Acquisition Corp., its path to becoming a public company may be imperiled.