Surfside man plied wealthy family ties in an insider trading scheme. He’s going to prison
Surfside resident David Schottenstein, a member of one the nation’s richest families, has been sentenced to a year and a day in prison for an $3.5 million insider trading scheme involving companies run by relatives.
Federal prosecutors, which had a sentencing recommendation of 46 to 57 months in his plea deal, said in a court filing that Schottenstein engaged in illegal trading “because of greed, and because he thought he could get away with it. His crime was the product of a rare blend of entitlement and opportunity.”
The response to the sentencing memo by Schottenstein’s attorney Eric Rosen argued that his client was not motivated by money, “but a need to be liked and validated by his peers” — particularly in the close-knit Jewish community where he and his family lived.
The opposite happened when Schottenstein agreed to cooperate against two other men originally also charged in the scheme — Ryan Shapiro of Bay Harbor Islands and Kris Bortnovsky of Surfside, according to a March 14 court filing by Rosen.
After the government arrested Shapiro and Bortnovsky and made Schottenstein’s cooperation public in December 2021, Rosen wrote, Schottenstein and his family “suffered prolonged ridicule and shaming within his community.” Rosen wrote that as a result Schottenstein suffered a mental health crisis and had even attempted suicide.
Schottenstein later decided not to testify against the other two men, both of whom had denied the allegations and pleaded not guilty to the federal charges. Prosecutors have since dropped charges against both.
Schottenstein was sentenced last month in Boston federal court by U.S. District Court Judge Douglas P. Woodlock. According to a filing on Monday, he will report on May 1 to the federal prison in Otisville, New York. In addition, Woodlock scheduled Schottenstein for 30 hours per week of community service during his five years of post-prison supervised release. He’ll also have to give up $634,593 cash in forfeiture.
Prosecutors said Schottenstein’s played on a relatives’ corporate board ties for information on a number of companies, including Designer Brands, then known as DSW; the grocery store chain Albertson’s; and Green Growth Brands, a company that sells cannibis products.
The Securities and Exchange Commission, which regulated stock trading, and the FBI’s Miami office helped with the investigation. Assistant U.S. Attorneys Stephen E. Frank and Seth B. Kosto handled the prosecution.
