Trump Media Accuses Nasdaq Market Makers of Illegal Naked Short Selling

Trump Media & Technology Group Corp. (TMTG) has accused Nasdaq market makers of engaging in illegal naked short selling to manipulate its stock price. In a securities filing, TMTG cited data showing that 60% of the trading volume in its stock came from just four firms: Citadel Securities, Virtu Americas, G1 Execution Services, and Jane Street Capital.

TMTG's CEO, Devin Nunes, sent a letter to Nasdaq CEO Adena Friedman, alleging that these market participants were responsible for the majority of trading in TMTG's stock, which trades under the ticker symbol "DJT". Nunes claimed this data was an indication of possible market manipulation, as TMTG's shares plunged over 70% between its market debut on March 26 and April 16 before recovering somewhat.

Why this matters: The allegations highlight the ongoing controversy and political tensions surrounding Trump Media and its Truth Social platform. The dispute also raises questions about the integrity of financial markets and the enforcement of rules designed to prevent manipulative trading practices like naked short selling.

In the letter, Nunes urged Nasdaq to take steps to "promote transparency and compliance" with U.S. securities rules that prohibit naked short selling. He noted that the DJT stock appears on Nasdaq's "Reg SHO threshold list", which is indicative of unlawful trading activity. Nunes also pointed to the fact that DJT has been the most expensive stock to short in the U.S., giving brokers a significant financial incentive to lend non-existent shares.

Nasdaq responded by expressing support for the SEC's efforts to address naked short selling, stating it is committed to ensuring liquidity, transparency, and integrity in its markets. However, Citadel Securities issued a scathing rebuttal, with a spokesperson calling Nunes "the proverbial loser who tries to blame 'naked' short selling for his falling stock price."

While short selling is legal, "naked" short selling, where an investor sells shares they do not possess, is illegal in the U.S. if done intentionally. However, it is difficult to determine if any naked short selling is occurring based on public data, as "fail-to-deliver" data could be related to long positions as well as short sales. Earlier, Trump Media had provided instructions for long-term shareholders on how to prevent the lending of their shares for short selling.

Nasdaq stated that it supports the SEC's rules and enforcement efforts designed to monitor and prohibit naked short selling. TMTG has requested that Nasdaq take additional steps such as requiring brokers to disclose their "Net Short" positions and preventing the lending of shares that do not exist. DJT shares have been on a volatile ride since trading began, hitting an all-time high before falling to an all-time low and then rallying in recent sessions.

Key Takeaways

• TMTG accuses Nasdaq market makers of illegal naked short selling to manipulate its stock.
• TMTG's CEO alleges 4 firms account for 60% of DJT stock trading, indicating possible market manipulation.
• Nasdaq expresses support for SEC efforts to address naked short selling, but Citadel rebuts TMTG's claims.
• Naked short selling is illegal, but determining its occurrence is difficult due to data limitations.
• TMTG requests Nasdaq take steps to increase transparency and prevent lending of non-existent shares.