Schottenstein family member to plead guilty to insider trading that netted him $635,000
A member of the Schottenstein family has agreed to plead guilty in federal court in Boston as part of a multimillion-dollar insider trading scheme that netted him more than $600,000 in profit, according to federal documents.
David Schottenstein, 38, of Surfside, Florida, faces a prison sentence of up to 20 years when he pleads guilty to a charge of conspiracy to commit securities fraud, though federal prosecutors likely will recommend a sentence less than that. He also will have to forfeit his gains of $634,893.
“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 issued through his attorney, Eric Rosen.
Schottenstein is a serial retail entrepreneur whose grandfather was one of four founding brothers of the company that spun off Designer Brands and American Eagle.
He is a founder of the eyewear company Prive Revaux and the men’s custom suit company Astor & Black. His other projects include Columbus-based No Surprises Software, which sells a cloud-based legal-billing system, and Swiss Stays, a company that sells adjustable collar stays.
Schottenstein is accused of obtaining inside information and using that to trade around market-moving announcements in 2017 and '18 involving companies that included DSW (now known as Designer Brands), drug store company Rite Aid and Canadian cannabis-related business Aphria.
He also is accused of sharing that information with two friends, Kris Bortnovsky, 40, also of Surfside, and Ryan Shapiro, 44, of Bay Harbor Island, Florida, who both traded ahead of these announcements.
Bortnovsky made a profit of more than $4 million and Shapiro a profit of $121,000 as part of the scheme, according to court documents.
Schottenstein received information from two relatives who served on corporate boards including Designer Brands, Green Growth Brands and grocery store company Albertson's, according to court documents. The relatives were not identified in documents, through Reuters said one of them matches Joey Schottenstein, a second cousin and board member of both Designer Brands and Green Growth Brands.
A spokesman for Joey Schottenstein and his father, Jay, issued a statement Monday, say the two “were shocked and saddened to learn last month of the illegal conduct and breach of their confidences."
In one case, David Schottenstein bought shares and call-option contracts in advance of a Designer Brands earnings report after receiving a text saying the company was "crushing it." He also shared that information with Bortnovsky.
The two tried to conceal their fraud with Schottenstein texting Bortnovsky, "To be clear and for the record I don't have any special insight or info or anything like that. Just a feeling."
On Aug, 31, 2017, Schottenstein bought 99,000 shares of Rite Aid after learning from the same relative that the drug store company was going to be acquired by Albertson's. The acquisition was later canceled.
mawilliams@dispatch.com
@BizMarkWilliams
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This article originally appeared on The Columbus Dispatch: Schottenstein family members, others conspire in insider trading case
