PHILADELPHIA, Jan. 26, 2024 (GLOBE NEWSWIRE) -- The law firm of Barrack, Rodos & Bacine announces that a class action lawsuit has been filed on behalf of investors in B. Riley Financial (“B. Riley”) (NASDAQ: RILY) who purchased B. Riley stock from May 10, 2023 through and including November 9, 2023 (the “Class Period”). The stock, which traded as high as $55 per share during the Class Period, is currently trading at just $20 per share.
If you purchased B. Riley stock during the Class Period and sustained a loss on your investment in these shares, you are encouraged to contact us about your rights in this matter and the possibility of leading this class action lawsuit.
You may contact the firm at https://barrack.com/newsroom/shareholder-alert-barrack-rodos-bacine-notifies-shareholders-of-b-riley-financial-rily-of-a-securities-class-action-lawsuit/, or by calling Linda Border or Mark Stein at 877-386-3304, or via email at investoralert@barrack.com.
The case concerns a series of complex financial transactions and B. Riley’s financial entanglement in them, and an investigation by the U.S. Department of Justice (“DOJ”) resulting in a guilty plea by one of the parties involved.
In May 2023, B. Riley entered into an agreement with a client, Brian Kahn, in a management buyout of Franchise Group, or FRG, for $2.8 billion. The deal closed on August 21, 2023.
Less than three months later, on November 2, 2023, the DOJ announced that the president of Prophecy Management, John Hughes, had pled guilty to defrauding investors out of $294 million. Brian Kahn was implicated as an unnamed co-conspirator in the fraud. Bloomberg News reported that Kahn had been identified by someone familiar with the matter as one of the conspirators.
The following day, a research firm tweeted that the DOJ’s “charging document implicates him [Kahn] in Hughes’ crime. There is a high chance of indictment here.” On this news, B. Riley’s stock dropped $9.02 per share, or 22%, to close at $32.54 per share.
Six days later, B. Riley released more details about the FRG transaction and the financial arrangements between Kahn, B. Riley, and the company’s subsidiaries. In response to these revelations, the same research firm said that “B. Riley ended up funding 281MM of what was around a 560MM equity check. That’s over 50% ownership. Yet they claim to have only 31% voting rights. It looks like B. Riley engaged in some funny business to avoid consolidation and placed control of FRG in the hands of the star of ‘Prophecy’ – Brian Kahn.” On this news, shares of B. Riley fell again, by 15%, or $4.47 per share, to close at $25.60 per share on Friday, November 10. The share price continued to fall in the next trading day, on Monday, November 13, 2023, losing 14% of its value, or $4.59 per share.
The complaint alleges that in spite of the credible implication of Brian Kahn in a conspiracy to defraud investors out of millions of dollars, B. Riley continued to finance the FRG transaction, which was likely to draw regulatory scrutiny. It is further alleged that B. Riley’s statements about the company's business, operations, and prospects were materially misleading or lacked a reasonable basis.
Philadelphia-based Barrack Rodos & Bacine has more than four decades of experience prosecuting securities law class actions, including cases involving accounting fraud and insider trading, and has achieved some of the largest recoveries in U.S. history of securities litigation. The firm's largest recoveries on behalf of investors include $6.19 billion for WorldCom investors, $3.32 billion for Cendant investors, $1.05 billion for McKesson investors, and $970.5 million for AIG investors.
