US authorities are looking into B. Riley Financial Inc.’s transactions with a key client who is connected to securities fraud. The investigation involves the use of the client’s assets to secure a loan from Nomura Holdings Inc., as reported by anonymous sources.
The US SEC has carried out interviews in recent months regarding B. Riley’s association with Brian Kahn, an unnamed co-conspirator in a criminal case related to the collapse of the Prophecy Asset Management hedge fund in 2020.
“We have not received anything from the SEC on this matter and to the extent the SEC makes an inquiry, we would fully cooperate as we have done in the past on all regulatory inquiries,” said B. Riley.
Several months after the FRG deal closed, a Kahn associate named John Hughes pleaded guilty in a securities fraud case, as reported by Bloomberg.
Hughes had pleaded guilty to the charges earlier. B. Riley, the hedge fund, clarified on Monday that it had no knowledge or involvement in the prophecy investigation and became aware of it only in November of the previous year.
According to a Bloomberg report, the SEC is investigating Kahn’s role in orchestrating the buyout of Franchise Group, the owner of Vitamin Shoppe, last year. B. Riley facilitated the deal, and Nomura provided partial financing, using some of Kahn’s assets as collateral.
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