By Jody Godoy

A Florida venture capitalist, his brother and an employee accused of insider trading before a blank check company's proposed merger with former U.S. President Donald Trump's social media company pleaded not guilty in a New York court on Thursday.

Michael and Gerald Shvartsman, and Bruce Garelick were charged last month with trading illegally in Digital World Acquisition Corp, a special purpose acquisition company, before it announced its plan to combine with Trump Media & Technology Group in late 2021. The merger, which would take Trump Media public, has yet to occur.

U.S. District Judge Lewis Liman scheduled trial in the case for March 18, 2024.

Neither Trump nor his company, which operates the Truth Social app, was accused of wrongdoing in the case.

Michael Shvartsman led Rocket One Capital, a small Miami-based venture capital firm that employed Garelick as chief investment officer and placed all its trades in Digital World securities, court papers show. Gerald Shvartsman runs a furniture store.

Authorities said Garelick, who was also a Digital World director, provided the Shvartsmans with what he called "intelligence" about merger talks.

The defendants then allegedly began buying Digital World securities and passed tips to others, prosecutors said, noting that they sold their holdings within two days after the Oct. 20, 2021, merger announcement caused Digital World's share price to more than quadruple.

In a related civil lawsuit against the men, the U.S. Securities and Exchange Commission said the sales resulted in illegal profit of about $18.3 million for Michael Shvartsman, $4.6 million for Gerald Shvartsman and $50,000 for Garelick.

The proposed Digital World-Trump Media merger remains uncertain.

If it closes, Trump Media would gain access to more than $1 billion in cash from Digital World's institutional investors, such as hedge funds. According to a Feb. 2, 2021 services agreement, Trump controls 90% of Trump Media.

Late last year, shareholders approved extending the deadline to close the merger to September 2023. Digital World shareholders are set to vote in August on whether to extend the deadline to September 2024.The cases are U.S. v. Shvartsman et al, U.S. District Court, Southern District of New York, No. 23-00307; and SEC v Garelick et al in the same court, No. 23-05567.

(Reporting by Jody Godoy and Jonathan Stempel in New York; Editing by Richard Chang)