(Bloomberg) – A federal investigation into Donald Trump’s social media deal sheds light on Rocket One Capital, an obscure private equity firm with no obvious connection to the deal beyond a board member .
The Miami-based private equity firm is one of only two companies identified by name in a regulatory filing late last month by Digital World Acquisition Corp., which described investigations into that entity’s planned deal. round to finance Trump Media & Technology Group Corp. the grand jury for the Southern District of New York is seeking “information regarding” Rocket One, according to the filing, through subpoenas issued to each member of Digital World’s board of directors. One of those board members was Bruce Garelick, chief investment officer of Rocket One.
Garelick resigned from Digital World’s board on June 22, according to the filing, shortly after Digital World learned that all of its directors had received subpoenas on June 16. No other director has resigned.
Digital World said in the filing that the grand jury investigation could delay or reverse its proposed merger with Trump’s media company, a move that is expected to inject $1 billion into it and bolster its Truth Social platform. The filing does not specify what information the grand jury is looking for on Rocket One, and the private equity firm’s relevance to the investigation beyond Garelick’s dual roles is a mystery.
Still, a closer look at Rocket One provides better insight into some of the entities and personalities in the orbit of the Trump Media deal.
There are no allegations of wrongdoing against Garelick or Rocket One in last month’s regulatory filing. Not much is known about the executive and the private equity firm either. But a recent Bloomberg Businessweek investigation citing documents and interviews with people in the marijuana industry shows that Garelick and the person listed as CEO of Rocket One are both closely involved in a technology known as ATMs. cashless.
Such software, which resides on point-of-sale devices, helps cannabis dispensaries circumvent banks that want to avoid doing transactions with them because of the federal illegality of marijuana. This created a legal gray area that caught the attention of credit card processors. There is no indication that the grand jury questions on Rocket One had anything to do with the cashless ATM industry.
“Cooperate fully”
Garelick, Digital World and Trump Media did not respond to requests for comment. In a July 1 statement, Trump Media said it “will continue to cooperate fully with investigations into our proposed merger and will comply with the subpoenas we recently received.”
Rocket One has a website that is currently in “maintenance mode”. A few months ago, the site described the firm as specializing in investments in fintech, adtech, entertainment, and commercial and residential real estate, ranging from $250,000 to $15 million. His portfolio included High Risk Commerce, a payments technology company that serves businesses considered high risk to banks, as well as better-known names such as Airbnb Inc.
According to Businessweek’s investigation, top Rocket One executives have also been involved in cashless ATMs, in part through a company that today has virtually no online profile called Transact First.
Learn more about Transact First’s role in cashless ATMs, a $7 billion banking loophole
Michael Shvartsman, recently named CEO and founder of Rocket One Capital, is also a director or officer of Transact First, according to the company’s 2020 incorporation documents. It is one of Transact First’s few public documents. The company’s website cited “downtime or capacity issues” for months, but in early 2021 described the company as taking payments globally, supporting 160 currencies.
Bloomberg’s months-long survey of cashless ATMs found that several cannabis industry participants describe Transact First as a major provider of such transactions, and Shvartsman as the primary representative of Transact First. Shvartsman declined to comment for this story, and a lawyer for Shvartsman who returned new calls about the probe seeking information on Rocket One declined to comment.
A call to Rocket One’s Miami phone number was picked up by an answering machine for a company called Foundation Capital. A LinkedIn page for Shvartsman lists his occupation as a founding partner of Foundation Capital, a venture capital and private equity firm apparently unrelated to the California-based company of the same name.
Gray area
Rocket One’s connections to Shvartsman and Transact First are notable because of the gray area in which cashless ATMs exist. They have arisen between state law, which allows cannabis to be sold under license, and federal law, which considers marijuana an illegal substance. They have become so prevalent in pot dispensaries across the United States that they are estimated to handle more than a quarter of the $28 billion in dispensary sales expected this year.
Since they charge between $2.75 and $3.50 per transaction, they have created a lucrative niche in the world of high-risk payments.
Although the technology behind cashless ATMs is complex, some lawyers call them legal problematic for a simple reason: many of them make marijuana purchases look like cash withdrawals from ATMs to banks that serve them. treat. This means they can circumvent anti-money laundering controls that require banks to know what and who they are working with. Visa Inc. and Mastercard Inc. have said they want to remove such transactions from their networks.
According to Businessweek’s investigation, which documented multiple marijuana purchases and bank statements, banks often unwittingly refund cashless cash withdrawal fees because many banks cover out-of-network cash withdrawal fees for their customers. .
A website with Shvartsman’s biography, also currently down, described him a few months ago as an Odessa, Ukraine-born, Toronto-raised businessman who is “a shareholder and partner of several companies with financial valuations in the hundreds of millions of dollars.
Overlapping slots
A person from the cannabis industry, who asked not to be identified for fear of jeopardizing relationships with fintech providers, said that after declining Transact First’s payment solution, the person accepted a meeting with Rocket One at a marijuana convention in Las Vegas in October – – only to showcase payment innovations that actually belonged to Transact First. Shvartsman and Garelick, Rocket One’s chief investment officer, were both present at that meeting, the person said.
Garelick was previously CFO of LeafLogix, a company now owned by Dutchie that provided cashless ATM technology to the cannabis industry. According to his LinkedIn profile, he had been at LeafLogix for just over a year, before joining Rocket One in 2020. A Dutchie spokesperson said Garelick was not employed at LeafLogix when Dutchie began discussing its acquisition. LeafLogix does not have a Cashless-ATM product, the spokesperson said, and Dutchie “paused” all LeafLogix payment solutions when the acquisition took effect.
According to earlier regulatory filings, Garelick was one of six directors or director nominees of Digital World, the financial entity that disclosed the grand jury subpoenas and underlying US Department of Justice investigations. Justice and the Securities and Exchange Commission.
Digital World is a publicly traded company known as SPAC, designed to quickly take a startup to the stock market. A public listing would be a boon for Trump, allowing him to attract equity investment from his supporters.
Digital World, led by Floridian Patrick Orlando, was advised on the deal by Shanghai-based ARC Capital, which has helped foreign companies list their shares in the United States. ARC Capital was the only other legal entity named in the investigation disclosure. According to the regulatory filing, ARC Capital is subject to SEC subpoenas. The filing did not say whether the Chinese financial advisory firm was also included in the federal grand jury investigation, which was seeking “some of the same documents” as the SEC investigation.
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