The US Securities and Exchange Commission (SEC) is investigating B. Riley's role in a buyout of Franchise Group Inc. (FRG), a deal that was orchestrated by an individual linked to the collapse of the Prophecy Asset Management hedge fund and partially financed by Nomura Holdings Inc., Bloomberg reported.

The SEC's interviews highlight how Brian Kahn's assets were utilized as collateral for Nomura's financing of the buyout of FRG. This development has impacted B. Riley's shares, attracting attention from short-sellers anticipating a downturn.

The Connection with Nomura

Amidst this turmoil, B. Riley maintains its stance, stated that it has yet to receive any official communication from the SEC. The company has emphasized its commitment to cooperate in regulatory inquiries, dispelling concerns while expressing frustration at what it perceives as aggressive tactics by short-sellers.

The SEC's scrutiny extends beyond B. Riley, encompassing bebe stores inc., a women's clothing chain controlled by B. Riley. Investigations seek to unravel the connections between bebe stores, B. Riley, and Kahn, adding complexity to this unfolding matter.

According to Bloomberg, as the investigations by the securities watchdog continue, the wider implications of these connections become increasingly apparent.

B. Riley's Response

In Response to this matter, B. Riley has denied involvement in any investigation by the SEC. The company, known for its diversified financial services platform, has termed the claims by the media publication as "baseless." Notably, the SEC declined to comment on the matter. However, B. Riley has reiterated its commitment to cooperation should an investigation materialize.

This is not the first time B. Riley Financial has faced such accusations. In November 2023, the firm disassociated itself from the investigation against Prophecy, asserting no prior knowledge or involvement in this matter. B. Riley maintains that the current resurgence of allegations appears to be an ongoing effort by short sellers to disseminate misinformation for personal gain.

"In its official statement, the company mentioned: As B. Riley stated in November 2023 when it first learned of the Prophecy investigation, B. Riley Financial had no involvement with, or knowledge of, any of those matters. The short sellers continue to disseminate false information for their own profit to the detriment of the firm's clients and customers."