According to U.S. officials, B. Riley Financial Inc. is being investigated for using important client Brian Kahn’s securities fraud-related assets to acquire a loan from Nomura Holdings Inc.
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B. Riley Faces SEC Scrutiny Over Kahn Dealings
The SEC has interviewed B. Riley and Kahn, one of two co-conspirators named by Prophecy Asset Management co-founder John Hughes in a securities fraud lawsuit. Kahn’s role in Nomura’s takeover of Franchise Group last year, with some of his assets pledged as collateral, is under examination.
Nomura, one of B. Riley’s key lenders, is trying to repair its risk management reputation after 2021 losses. Note that the SEC’s inquiry does not implicate Nomura. B. Riley called the report “parroting baseless allegations” manufactured by short sellers to undermine the firm.
Despite not knowing about an SEC inquiry, the business promised complete cooperation. B. Riley denied involvement with the November 2023 Prophecy probe. The corporation claimed short sellers spread false information for personal gain at the expense of its clients and customers.
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Stock Dips, Nomura Rises
Other developments include SEC Los Angeles investigators looking into B. Riley’s involvement with Bebe Shops Inc., a bank-controlled women’s clothing chain linked to Kahn. B. Riley (RILY) fell 10.9% to $17.99, while Nomura (NMR) rose 2.02% to $5.05 premarket.
Financial organizations encounter hurdles when charges of illegal activities surface. SEC participation shows the matter’s gravity, but more information is needed before forming conclusions regarding misbehavior. Market participants and regulatory authorities will closely scrutinize B. Riley’s reputation, finances, and relationship with Nomura after the probe.
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