A $3.5 Million Insider Trading Deal With Surfside, Rite Aid, Designer Shoes And Weed [Miami Herald]

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A Surfing side-member of one of the wealthiest families in America, the one that runs Designer brands, American Eagle and is tied to Albertsons stores, participated in an insider trading scheme that netted at least $3.5 million.

But at the same time David Schottenstein admitted conspiracy to commit securities fraud with Thursday’s guilty plea Boston Federal court lawyers for two other people facing the same charge as well as aiding and abetting securities fraud say they are fighting.

James Froccoro, representing Surfside Kris Bortnovsky, sent an email stating that his client “is innocent of the allegations contained in the indictment and will plead NOT GUILTY!”

Martin Weinberg, attorney for Bay Harbor Islands’ Ryan Shapiro, emailed that his client “is a highly valued MiamiMontreal-based entrepreneur and philanthropist. He fully intends to mount a vigorous defense that will demonstrate his factual and legal innocence of the allegations at issue in the case. Boston Case.”

On the civilian side, the Security and Exchange Commission filed a complaint against the companies Schottenstein, Bortnovsky, Shapiro and Bortnovsky Sakal Capital Management and Sakal American Fund.

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the SECOND said Bortnovsky, using advice from Schottenstein that the latter gathered from family members, made $4 million on insider trading involving the proposed 2018 merger of Albertsons and Ritual Aid which was canceled and a takeover of a Canadian cannabis company. Using his inside knowledge, the SECOND said, allowed Shapiro to take advantage $121,000 on these offers.

According to Schottenstein’s guilty plea and the Federal Court’s sentencing table, the we The lawyer recommends a prison sentence at the lower end of a range of 46 months to 57 months. Prosecutors also recommend restitution to be determined by the court, $634,893 in forfeiture and a year of supervised release after Schottenstein completed his prison term.

“I take full and sole responsibility for my conduct and deeply regret my actions,” David Schottenstein said in a statement emailed to Miami Herald by his lawyer, Eric Rosen. “I apologize to my family, friends and colleagues.”

DSW and “crush it”

“Family affairs” may be synonymous with “financial affairs” for the Schottenstein family, once ranked by Forbes among the 100 richest in the country. The Schottensteins shed their own blood, legally, for money.

Ball port resident Beverley Schottenstein, 95, is still in Miami federal court trying to figure out how much money she’s gonna get from JP Morgan Securities and grandsons Evan Schottenstein and Avi Schottenstein after a Financial Sector Regulatory Authority the panel ruled that they almost owed him $19 million for unauthorized transactions on his account.

Since 2005, Jay Schottenstein was the executive chairman of Designer brands, known as shoe company DSW in 2017. He has also served on the board of Albertsons since 2006. Jay Schottenstein is mentioned in the SECOND complaint as “Insider 2” and in the criminal charge documents as “Individual 2”.

miami beach-based Joey Schottenstein, son of Jay, was DSW/Designer brands member of the board of directors and, for nine months of 2018, on the board of directors Green Growth Marks (GGB). GGB is described in court documents as “a retailer of cannabis-related products.” Joey Schottenstein is mentioned in the SECOND complaint as “Insider 1” and in the criminal charge documents as “Individual 1”.

the SECOND the complaint says Jay Schottenstein is the uncle of David Schottenstein. But a representative of Joey and Jay Schottenstein says Joey is David’s second cousin, not first cousin.

The scheme described in David Schottenstein’s charging documents began with David calling his cousin Joey to ask how DSW was doing and Joe telling David that DSW was “crushing” him.

so informed, David Schottenstein purchased DSW shares and call option contracts on August 15, 2017. On the same day, according to prosecutors, David passed this information to Bortnovsky and Bortnovsky caused the Sakal American Fund buy 35,000 DSW shares. The request for charging documents David Schottenstein and Bortnovsky then exchanged messages that day as cover.

David Schottenstein: “To be clear and for the record, I don’t have any particular information or information or anything like that. Just a feeling.”

Bortnovsky: “I didn’t think anything different.”

Three days later, the charging documents say, David Schottenstein bought more DSW shares and call options and Bortnovsky had Sakal American Fund to buy $2 million of DSW shares. After DSW announced “strong quarterly financial results for the second quarter of 2017,” the documents say, Schottenstein, Bortnovsky, Sakal Capital Management and Sakal American Fund have sold all shares and securities of DSW in their personal and business accounts.

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Wasn’t the money from the Albertsons-Rite Aid merger?

David Schottenstein’s indictment documents say about August 31 he bought 99,000 shares of Ritual Aid after Joey Schottenstein told him that Albertsons planned to buy Ritual Aid.

From September 15, 2017, through February 20, 2018, say the charging documents, David Schottenstein kept mining Joey Schottenstein for information on the arrival Ritual Aid acquisition that he will pass on to Bortnovsky and Shapiro. They also talked about how it would help Kimco, part owner of Albertsons.

On Valentine’s Day 2018, Schottenstein sent Bortnovsky a message that he had purchased Kimco shares and, according to the documents, Bortnovsky had Sakal American Fund purchase approximately 250,000 shares of Ritual Aid. Trust account controlled by Shapiro bought ‘tens of thousands’ of Ritual Aid actions, according to court documents, and more than 6,500 actions of Kimco.

The Wall Street Journal reported February 20, 2018, which Albertsons planned to buy Ritual Aid. Court documents say Shapiro sent a message David Schottenstein, “Have you seen the beautiful headline in the wsj?”

The street reported that Ritual Aid the stock jumped 7.5% in early trading New York, then ended the day up 3.2%. The charging documents say David Schottenstein and Shapiro has sold tens of thousands of Ritual Aid share that day.

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Illegally graze the grass for the green?

The charging documents say David Schottenstein learned from another cousin case Joey Schottenstein, “by virtue of their relationship of trust:” Green Growth Marks (GGB) was going to launch a hostile takeover bid on Aphria, a Canadian company that manufactured cannabis products.

After David Schottenstein says Shapiro and Bortnovsky on December 18, the billing documents indicate that they purchased Aphria titles, like David Schottenstein had done four days earlier. And GGB announced its hostile takeover of December 27, 2018.

Corn Aphria rejected the offer on December 28, 2018. David Schottenstein learned from cousin Joe that GGB would not increase his offer. The charging documents say David Schottenstein told Shapiro “Sit well. Do nothing” and told Bortnovsky that GGB would probably have to raise their bid and others might start a bidding battle.

Bortnovsky allegedly unloaded thousands of Aphria titles through Sakal American Fund for $900,000 to December 28. At January 10, 2019, David Schottenstein told Shapiro “sell you know what please” as he dumped 75,000 shares personally owned by Aphria. By the time Bortnovsky finished selling his stock and call options, prosecutors say his proceeds were $4.6 million.

The charging documents say Shapiro forwarded an email to David Schottenstein showing that he had gains of $175,000 in Aphria and another trade allegedly made with inside information, but took a $120,000 knock on another purchase that David Schottenstein suggested without inside information.

“Schottenstein responded by asking Shapiro to donate, on Schottenstein’s behalf, half of Schottenstein’s net profits from Shapiro’s business based on Schottenstein’s advice to the synagogue Schottenstein and Shapiro attended,” reads court documents, “and noted that Shapiro would thus get” the deduction.

This story has been updated to reflect the family’s description of the relationship of Joey Schottenstein and Jay Schottenstein at David Schottenstein.

© 2022 Miami Herald. Visit miamiherald.com. Distributed by Tribune Content Agency, LLC.

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