DONALD TRUMP’S MARKETS KAYFABE & YOUR RETIREMENT FUND

Millennials, Boomers are Screwing You One Last Time

Transparency and a strong rule of law form the foundation of US markets and are why people invest their money here. Up until Liberation Day, foreigners held 20% of US equities and nearly a third of the bond market debt. Now, not so much. If you have money in American equities or exposure to debt markets, as do most Americans, you’re hemorrhaging money, and your retirement day is moving further into the future.  But do you know who’s planning for early retirement?

Donald Trump’s insiders. 

By now, you’ve been inundated with stories about market values falling. This isn’t that. Instead, this is how self-dealing under the direction of one man is debasing the coin of US markets – and, by extension, your savings. 

Capital fleeing American markets is seeking to distance itself from this arbitrary and wealth-eroding behavior. Financial experts will debate whether we can reverse the capital flight. But all of us can staunch the bleeding with aggressive state-level anti-corruption policies. Quit waiting for the DC crowd to act. They won’t.

State-level anti-corruption is where it’s at

Those who have been reading us for a while recognize this theme, and we will keep banging this drum. DKP has begun organizing some of these efforts. We are organizing an effort to disrupt the flow of corrupt Russian capital that Trump has planned for US markets with his Ukraine ceasefire deal. 

As we grow, we are moving beyond just pointing out what states can do to working with them to deliver results on the ground and start nudging us off of our current corrupt, authoritarian glidepath.

Self-dealing is good business

Trump’s crypto empire gets so much attention that people forget about his other billion-dollar venture. We’re going to go through that second one and the less-than-arduous path it journeyed to get here 

I am speaking about Truth Social, which is officially part of Truth Media and Technology Group (TMTG). The midwifing of TMTG presents a masterclass in dodging scrutiny. It is a project built on confirmed falsehoods, shadowy finance, and exploiting loopholes. It’s a story of regulatory arbitrage, opaque money, and national security risks that makes a mockery of the rules-based order that has allowed you and me to plan for retirement. 

So, let’s tuck in. 

Genesis

In the beginning, there was a blank-check company, and that blank-check company was called Digital World Acquisition Corporation (DWAC). Corporate attorneys will tell you that blank-check companies are legal. And that’s precisely the problem. Like tax loopholes, they slowly eat away at the system’s integrity.   

They exist to avoid the typical transparency gauntlet our regulators force companies to run before they earn a place in US public markets. The transparency of American markets has helped make them reliable institutions into which we entrust our economic futures. They’re not the cheapest, easiest to manage or even most lucrative. But they’re rock solid. 

The typical public offering process subjects a company to a deep SEC review through its “S-1” process. It’s basically an audit, so I’m sure you’ll be shocked to learn that Donald Trump chose another path. He chose the path of the blank-check company, a legal loophole that skirts all the regulatory due diligence.  This path to going public basically involves raising a bunch of money, taking that big pile of cash public, and only then buying something with it. Through the magic of this process, these companies pollute our markets with scant scrutiny having been paid to the source of the capital. And in the case of TMTG, we get stuck with an embarrassing meme stock constantly pumped by the president of the United States 

Exodus – I AM WHO I AM

We can only guess why Trump chose this path, but, in the spirit of transparency, let’s ask a few questions TMTG has dodged on the path to a $7 billion valuation.  

Is there a viable business model? How many users does TMTG have? Who are the investors and beneficial owners? 

TMTG’s primary product is Donald Trump, and he is now president. That, not the typical market roadshow, sets the price. And it has, er, distinct meme stock characteristics. 

Always. on. brand.

Did you know that the President’s company got in trouble – like a lot – with the SEC as it went through even this less-than-thorough process? I watch this stuff pretty closely, and it just faded into the din of what has become American politics. Let’s recap.

DWAC lied about talking to TMTG before its IPO. This is a big no-no. Participants in these pre-arranged marriages must express surprise at the identity of their future partner. It’s a ridiculous rule but one of the few strict ones about these blank-check companies. TMTG broke it and settled with the SEC for $18 million. 

DWAC’s CEO at the time actually managed a second blank-check company considering merging with TMTG but didn’t disclose that publicly. 

Plus, a DWAC board member and his associates were convicted or pleaded guilty to insider trading. They made $22.9 million in illegal profits with insider knowledge about the timing of the merger announcements. 

Not the red flags

“Beneficial ownership” identifies who really put up the cash. And, in the case of the president of the United States’ media company, we only know enough to worry us. 

For example, a crucial loan was provided by the ES Family Trust. Who owns the trust isn’t clear. However, we know that one person linked to it is Anton Postolnikov. Postolnikov is a Miami businessman born in Russia and the nephew of a long-time Russian official. In 2017, his hometown charged him with tax fraud. He owns a bank on the island of Dominica called Paxum, which is known for investing in marijuana dispensaries. Any of those things may be why he’s reportedly under investigation by the FBI and DHS.

TMTG’s Sponsor, ARC Global, links back to Patrick Orlando, the original CEO of TMTG, and a history that connects the “ARC” name back to SEC troubles in China. DWAC apparently failed to report this potentially materially significant fact. 

The auditor, BF Borgers, signed off the financials used for the merger. Notably, Borgers was charged with “massive fraud” in an unrelated matter. 

At various times, the US Patent and Trade Office refused Truth Social their trademark, it was unclear who was on the board, an investor sued the CEO for fraud, and the company was under SEC investigation. But ¯\_(ツ)_/¯ = $7 billion.

Minor fraud?

Well, TMTG’s revenue is certainly minor, even if its valuation is not. Therein lies the problem. Seasoned market analyst John Rekentheler made the observation that, were TMTG a normal company, it would trade at $0.50. Instead, because it’s the monetized quintessence of Donald Trump, it has a $7 billion market capitalization based on $4.1 million in earnings and an unaudited number of users. The technical financial term for this is “really, really bad.”

TMTG’s revenue and small user base make it hard to compare it to other public companies because its peers aren’t public. They’re too small. One of the closest comparisons is Mastodon, Truth Socia’s builders used Mastadon’s open-source software as its backend. Truth Social didn’t even write its backend code. 

The above chart has three serious public companies compared to the less-than-serious offering put forward by the President of the United States that is now polluting our markets and, by extension, your retirement. You’d never go to a 3-star Michelin restaurant and find Hot Pockets on the menu. If a chef adopted 7/11 menu items, it wouldn’t just reduce their Michelin star count. It would make them a laughing stock. 

Hot Pockets of NASDAQ. 

We used to be a serious country, allowing people to save and plan for retirement. As a result, most Americans own equities, and even more are exposed to them. The integrity of our markets and the strict rule of law facilitated all of that. If you build markets with radical transparency and strictly enforced rules, the world will show up to trade on them. If you don’t? Well, things like liquidity and valuations will suffer. It becomes a race to the bottom on prices and regulations. Authoritarian countries like the UAE will always have cheaper and easier market access rules. 

US markets offer a Unique Selling Proposition (USP) of transparency and a stable rule of law. What two things is Trump taking chipping away at? Transparency and the rule of law. This topic may seem gauzy and esoteric, but it has very tangible impacts on your financial planning. 

Such things may not be as immediately noticeable on your portfolio as Liberation Day, but Trump has invitied MAGA to your retirement party. His (alleged) fraud made Trump immediately richer, but it’s making you gradually poorer.   

When kabuki theater becomes a viable equity valuation strategy and can pass muster for a plan in US markets, it tarnishes the markets and everything traded on them. 

Enough

TMTG is a case study in exploiting financial systems for opaque ends. The duty falls to the states when the federal government won’t step in – and, let’s face it, it won’t. Here at DKP, we are pointing out where states and individuals have agency to stop this, and the plan is to begin organizing state-level actions to that end. An entire industry of well-meaning scholars and activists have been hollering at Washington about corruption for over a decade. While that hollering achieved some results, Trump immediately dismantled those achievements. We wrote about it here.

But now that the president of the United States is an active participant in global kleptocracy, we’re going to organize the states to do something about it. 

A tangible place to start chipping away at this massive problem is Massachusetts. The Bay State has enormous pools of state-regulated capital. Their state pension fund alone rivals the size of the Russian sovereign wealth fund. 

And Massachusetts has a strong and existing framework of anti-corruption laws. With that framework, Massachusetts can give Wall Street financial managers a choice. They may either do business with corruption-tainted Russian money. Or they may choose to do business with Massachusetts-regulated capital. But not both. Following suit, states like Connecticut, New York, California and Illinois will effectively block Russian capital from US markets. 

Pulling back the curtain

It’s time for State AGs to go directly at Trump’s corrupt business empire, hammer and tongs..

State attorneys general typically have powerful securities regulations, or what’s commonly referred to as Blue Sky Laws. They also have authority under Deceptive Trade Practices Acts.  And while those laws will not replace the authority of SEC regulations, they give AGs the authority to investigate and bring enforcement actions against fraudulent activities or material misrepresentations made in connection with the sale of securities to residents of their states. The SEC has already established a strong predicate for state-level inquiries. Civil society activists can help encourage these states to compel testimony and subpoena records.  

New York’s AG, Letitia James, could take on Donald Trump’s questionable company arrangements. New York’s Martin Act grants her broad authority to prosecute securities fraud occurring within New York, home of the NASDAQ. Based on the mere suspicion of impropriety, she can initiate investigations into many of the above misrepresentations. 

TMTG’s Delaware incorporation makes them vulnerable to shareholder lawsuits and legal activism in Delaware’s Chancery Court system. Alexei Navalny started doing this kind of shareholder activism, which is precisely the approach needed today. That will present mechanisms for discovery, the ability to subpoena directors, officers and relevant third parties to obtain internal documents and communications.

These various authorities could dig into the ES Family Trust origins, ARC Global’s funding and the company’s pre-IPO communications. 

Regaining the national narrative

A coalition of Blue states acting in defiance of administration lawlessness is the last, best hope for preserving American democracy and the rule of law. If Democratic AGs can score some victories against Trump’s network of companies and associates that are potentially breaking our laws and fend off the feds while doing so, they will have momentum. This could open the door to all kinds of potential lines of attack and defense – environmental policies, DEI, corporate ESGs and more. States have the leverage. They just need to organize around this common project aimed at saving a system that has built a level of wealth unprecedented in history but which is being debased and despoiled.