CFO of Bed Bath & Beyond who died on Friday was being sued for intentionally raising the stock price of the firm in an effort to sell off his shares at a higher price.
A group of shareholders filed a class action complaint against Gustavo Arnal, 52, and other defendants, alleging that Arnal and majority shareholder Ryan Cohen engaged in a “pump and dump” scam that caused them to lose about $1.2 billion.
The lawsuit asserts that on August 23, Cohen approached Arnal about a scheme to get control of shares of Bed Bath and Beyond so they could both profit. The case was filed in the United States District Court for the District of Columbia.
Arnal “agreed to regulate all insider sales by BBBY’s officers and directors as part of the strategy to ensure that the market would not be swamped with a significant number of BBBY shares at a particular time,” the lawsuit says.
Following that, he allegedly made “materially deceptive comments to investors regarding BBBY’s strategic corporate plans, financial situation, and reports of shares holding and selling” in an effort to drive up share prices.
By the time Arnal sold over 42,000 shares in the company two weeks ago it was valued at $1 million, according to MarketBeat.com.
The complaint was subsequently submitted barely one week before Arnal committed himself on Friday by leaping to his own death from the 18th story of lower Manhattan’s renowned “Jenga” tower.
On behalf of everyone who bought Bed Bath & Beyond stocks between March 25 and August 18, Virginia resident Pengcheng Si filed the class action complaint.
They are now requesting compensation for the alleged “pump and dump” operation, alleging that Cohen offered to buy a sizeable interest in the business along with call options on more than 1.6 million hares for prices ranging from $60 to $80.
The lawsuit asserts that in return, Arnal would make sure that insiders wouldn’t oversupply the market with the stock.
In order to artificially raise the share price, he allegedly did so by making “materially deceptive statements and omissions” about the company’s financial situation, the lawsuit claims.
According to the business’s financial reporting and public pronouncements, BBBY “looked to be a successful turning-around company into mid-August 2022,” the lawsuit claims.
According to the document, however, Arnal “blatantly misrepresented the value and profitability of [the company], causing BBBY to report revenues that were fictitious [and] announce publicly that the company is successfully on the way spinning off Buybuy Baby to ‘unlock full value’ of this ‘tremendous asset.’
But according to the lawsuit, Buybuy Baby wasn’t truly doing well financially.
It wasn’t made public until the market shut down the next day, when shares fell from a record high of $30 per share to roughly $22.50 per share.
Following the filing of a form indicating that Arnal and Cohen had sold all of their shares on August 16, the stock fell by 45 percent to $16.16.
When compared to its peak of $30 per share, it subsequently proceeded to decline, reaching $8.78 on August 23. Bed Bath and Beyond’s stock price dropped to just $8.63 on September 4.
MarketBeat.com reports that on August 16th, Gustavo Arnal sold his 42,513 shares of company stock for just over $1 million. In 2020, Gustavo Arnal started working for Bed Bath & Beyond. He was once the CFO for Avon, a major cosmetics company based in London.
According to InsiderTrades.com, Gustavo Arnal earned $2.9 million from Bed Bath & Beyond in 2021, with $7,75,000 of that coming from salary and the rest from stock awards. Gustavo Arnal owned 267,896 shares in the business at the time, which were worth little under USD 6.5 million.
The Jenga Building, an 821-foot-tall 60-story luxury building in Tribeca, Manhattan, New York City, is the tallest building in the neighbourhood. Gustavo Arnal leaped from it. Numerous celebrities call its 145 homes, which range in price from $3.5 million to $50 million, home.
A corporate representative had stated that they were bringing in top-tier talent that would open new doors for the company’s rebirth when Gustavo joined in 2020. He was hired during COVID-19, a time when businesses all around the world were struggling.
Following that, on August 16, Cohen submitted a paperwork to the Securities and Exchange Commission stating that he held 9,450,100 shares, including 1,670,100 shares under specific call options.
Additionally, it was asserted that he held onto his April call options, which would only start to pay him if the price reached $60 per share prior to January 20, 2023.
According to the lawsuit, he was shortly given three seats on the business’s board, but at that moment, he had already sold the majority of his company shares.
The complaint asserts that Cohen instead “provided [the document] for the purpose of triggering [a] purchasing frenzy of BBBY stocks so that Cohen can finish selling his shares at [an] artificially inflated price.”
That day, according to the lawsuit, stock values increased by 75%.
The lawsuit asserts that Arnal knew about Cohen’s fictitious SEC filings since he was the CFO.
Furthermore, it states that they spoke with JP Morgan Securities LLC about their exit plan prior to selling off their shares.
They “have done so for self-serving, improper, and bad faith reasons, including a desire to profit from the sales of their BBBY shares,” according to the document. They also “have violated their fiduciary duty by making false filings, issuing misleading statements, and pumping and dumping BBY shares,” it adds.
The lawsuit then asserts that JP Morgan Securities encouraged and assisted the scheme to “launder over $110 million in illicit insider trading proceeds.” DailyMail.com has contacted Bed Bath and Beyond for a response.
After the retailer’s stock price soared to $27 per share on August 16, Freeman, whose family is from the New York City region, roughly sold more than $130 million worth of stock. Arnal did the same thing the following day.
Arnal committed suicide by jumping to his death from the 18th story of the opulent Jenga building in Manhattan’s Tribeca district just one week after the damaging lawsuit was filed.
According to authorities, complaints of the Friday afternoon leap at 56 Leonard Street near Church Street started to come in around 12:30 p.m.
According to the New York Post, Arnal was recognised as the jumper at the 57-story building on Friday afternoon. Apartments there can cost up to $50 million.
When the city’s EMS personnel arrived on the scene, they could be seen removing the man’s body in a black bodybag.
According to an FDNY representative, a second victim, who was also unidentified, was hospitalised with minor wounds.
Near the building, a woman was spotted crying and acting distressed before getting into the ambulance. The hospitalised patient’s age and gender were unknown to the FDNY official.
