Trump-Linked SPAC Auditor Cites SEC Charges as Trigger to Quit

Audit firm Marcum LLP said Tuesday it decided to step down down as auditor of the blank-check company trying to take Donald Trump’s media company public after its client settled US regulator fraud charges in July.

The decision was “primarily in response to concerns regarding the Company’s management and governance structure following its July 20, 2023 settled order with the Commission,” the audit firm said in a letter it sent to the Securities and Exchange Commission on Aug. 15.

Special purpose acquisition company Digital World Acquisition Corp. in July settled SEC charges that it misled the public by failing to disclose that it had formulated a plan to acquire Trump’s company prior to the SPAC’s initial public offering. DWAC will have to pay an $18 million penalty if the deal closes, the SEC said.

Digital World said it aims to complete its merger with Trump Media & Technology Group, which runs the Truth Social platform, by year-end.

The SPAC disclosed Aug. 1 that Marcum quit as auditor without giving the company any notice and without completing work on the SPAC’s 2022 year-end financial statement, which had errors in how the company accounted for expenses that needed to be corrected.

When an auditor quits or a company selects a new auditor itself, the company must alert the market and detail whether the auditor resigned or got fired, identify whether a new auditor has been hired, and disclose any disagreements between the auditor and the company. The auditor must send a letter to the SEC saying it agreed or disagreed with the company’s disclosure.

Auditor change alerts are usually routine, boilerplate affairs. Digital World’s Aug. 1 filing was not.

In addition to saying Marcum quit “without notice” and for no reason, the SPAC also cast aspersions at the quality of Marcum’s work. It rehashed Marcum’s recent $13 million fine to settle regulator charges that the firm had “systemic quality control failures” as it rose to become the top SPAC auditor. Marcum also didn’t provide the firm with a letter to send to the SEC, the SPAC said.

Marcum in its Aug. 15 letter said it disagreed with several of the statements Digital World made in the Aug. 1 securities filing, including that it was the audit firm’s responsibility to ensure the company had properly accrued for its expenses. That’s the company’s job, Marcum said. Further, the company’s management told Marcum in April that there were no material transactions that had not been properly recorded. “This statement was incorrect because the Company had not properly accrued for the invoices in question,” Marcum said.

Auditors are essential to getting SPAC deals done. Without complete and accurate audited financial statements, a blank-check firm can’t submit necessary paperwork with the SEC to finalize a merger with a private company.

Digital World on Aug. 9 announced it had hired accounting firm Adeptus Partners LLC as its new auditor.

The merger has been one of the the most closely watched SPAC deals, given the former president’s role, the attraction of retail traders and short sellers, and Trump’s current presidential campaign.

Digital World did not immediately respond to a request for comment about Marcum’s resignation letter.