COLUMBUS, Ohio (COLUMBUS BUSINESS FIRST) — A member of the Schottenstein family is pleading guilty in an insider trading case.
In a plea agreement, David Schottenstein is admitting to conspiring to commit securities fraud, according to documents filed Thursday in U.S. District Court in Boston.
The documents say Schottenstein made more than $634,895 in three incidents in 2017 and 2018 in which he traded stocks with advanced knowledge of earnings news and potential acquisitions. All involved businesses with connections to the Schottenstein family.
“I take full and sole responsibility for my conduct and deeply regret my actions. I apologize to my family, friends and colleagues,” Schottenstein said in a statement provided by his lawyer Eric Rosen.
Friends and business associates Ryan Shapiro and Kris Bortnovsky, as well as Bortnovsky’s Sakal Capital Management LLC and Sakal U.S. Fund LLC also were named in the case, which was filed last month.
According to the court documents, which detail numerous trades and text conversations between the parties involved, Bortnovsky made $260,000 personally and $293,000 for another individual. Sakal profited by more than $3.4 million. Shapiro made $121,000.
There were at least three instances – an August 2017 DSW Inc. (now called Designer Brands Inc.) earnings announcement, a February 2018 merger agreement between Rite Aid Corp. and Alberstons Companies Inc. and a December 2018 acquisition of Aphria Inc. by Green Growth Brands Inc. – in which Schottenstein and the others bought stock in advance of public announcements and then sold the stock after it rose in value once the news was made public. Neither the Rite Aid nor Aphria deals ultimately occurred.
Though “Insider 1” is not identified by name in the filing, a report by Reuters notes that the description matches Joey Schottenstein, a second cousin and board member of both Designer Brands (NYSE:DBI) and Green Growth Brands.
The documents describe him and David Schottenstein as cousins and close friends.
Jay Schottenstein, executive chairman of Designer Brands and a member of the Alberstons board and father of Joey Schottenstein, also is referenced in the court documents as “Insider 2” though there is no indication he gave information directly to David Schottenstein.
A spokesperson for Joey and Jay Schottenstein said they were “shocked and saddened” to learn of the illegal conduct and breach of their confidences. Because of the pending legal status of the case, they offered no further comment.
David Schottenstein has lived in Florida since 2010 and, in his most recent venture, launched the Prive Revaux sunglasses brand in 2016, though he previously started and ran multiple businesses in Columbus including the Viewabill legal billing software company and Astor & Black custom suits.
Schottenstein faced a maximum sentence of 20 years in prison with supervised release for three years, restitution of $634,893 and a fine of $250,000 or double the gross gain or loss depending on which is greater, though the actual penalties will be less.
According to the plea agreement, the incarceration and fine will be at the lower end of the guidelines, with 12 months of supervised release, restitution to be determined and forfeiture of $634,893.
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