Business

US drops insider-trading lawsuit against two Florida men



© Reuters.

By Nate Raymond

BOSTON (Reuters) – U.S. prosecutors on Monday moved to dismiss insider-trading allegations against a hedge fund manager and a Florida businessman after their star witness withdrew agreed to cooperate with the authorities and decided not to testify against one of them.

Federal prosecutors in Boston last year accused Kris Bortnovsky and Ryan Shapiro of making illegal transactions based on advice they received from a friend whose family held investments. and leadership roles in retailers such as DSW JOINT STOCK COMPANY .

That friend was David Schottenstein, the founder of a sunglasses design company, who in February pleaded guilty after agreeing to cooperate against two Florida men.

But Schottenstein last week pulled out of his partnership agreement, saying psychologists and a therapist advised him to testify against his friend Shapiro at his trial in May. 2023 will “exacerbate” his mental health problems.

Prosecutors on Monday said the “unexpected” development warranted the dismissal of the lawsuit against Bortnovsky, co-founder of Sakal Capital Management, and Shapiro, founder of prisoner remittance service provider JPay .

Prosecutors left the door open to renewing the charges, saying their investigation was ongoing.

Martin Weinberg, Shapiro’s attorney, said his client “now that the challenge of becoming a federal criminal defendant is over, will do great things in his career and personal life.”

Lawyers for Bortnovsky and Schottenstein declined to comment.

Prosecutors say Schottenstein made more than $600,000 in deals in 2017 and 2018 thanks to inside information he obtained from a relative about DSW-related merger and earnings announcements. , now known as Designer Brands (NYSE:) Inc; Aphria (NASDAQ:) Inc; and Rite Aid (NYSE:) Corp.

Relatives sit on the board of DSW and Green growth brand (OTC:), pursued a failed attempt to buy Aphria, and a Schottenstein family business was involved in a failed merger involving Rite Aid.

Prosecutors and the U.S. Securities and Exchange Commission said Schottenstein gave his friends, in turn, expected news of the company, allowing Bortnovsky and his fund to earn more than $4. million dollars and Shapiro collected $121,000.

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