Founder of designer sunglasses company pleads guilty to insider trading

A general view of the John Joseph Moakley courthouse in Boston, Massachusetts, United States on July 27, 2021. REUTERS / Nicholas Pfosi

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BOSTON, Jan.6 (Reuters) – The founder of a branded eyewear company whose family has held investment and leadership positions at many large retailers like DSW Inc has agreed to plead guilty to committing a misdemeanor insider with two Florida men using information he learned from a cousin.

Boston federal prosecutors revealed in court documents on Thursday that David Schottenstein had agreed to plead guilty to conspire to commit securities fraud and to cooperate in the prosecution of a venture capitalist and entrepreneur.

An attorney for Schottenstein, the founder of designer sunglasses company Privè Revaux, did not respond to requests for comment.

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Prosecutors said Schottenstein, 38, exchanged inside information he learned from a cousin who served on the boards of shoe retailer DSW and cannabis company Green Growth Brands ( GGB).

Schottenstein negotiated before the 2017 results were announced by DSW; the 2018 news that Albertsons Companies (ACI.N) and Rite Aid Corp had agreed to merge; and a 2018 GGB takeover bid for Canadian cannabis-related company Aphria Inc, prosecutors said.

The cousin’s family business was part of an investment consortium involved in the Rite Aid transaction, which subsequently failed.

Schottenstein made more than $ 600,000 from his trades, the US Securities and Exchange Commission said in a related lawsuit.

Prosecutors said Schottenstein also illegally informed two friends – Kris Bortnovsky, co-founder of Sakal Capital Management, and Ryan Shapiro, who founded inmate money transfer service provider JPay – to the expected news.

Authorities said Bortnovsky traded before the three announcements and Shapiro traded advice on Rite Aid and Aphria.

The SEC said Bortnovsky made more than $ 4 million and Shapiro illegally raised $ 121,000. They were originally indicted last month and formally charged on Thursday.

James Froccaro, Bortnovsky’s lawyer, said he was innocent. Martin Weinberg, Shapiro’s attorney, said he “is factually and legally innocent of today’s allegations.”

DSW is now part of Designer Brands Inc (DBI.N). GGB filed for bankruptcy in 2020 following the failure of its bid for Aphria.

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Reporting by Nate Raymond in Boston; Editing by Bill Berkrot

Our standards: Thomson Reuters Trust Principles.

Barbara M. Stokes