(Reuters) -U.S. authorities are investigating B. Riley Financial’s deals with a client who was linked to a securities fraud, and the use of his assets to help the investment bank obtain a loan from Nomura Holdings, Bloomberg News reported.
B. Riley said in a statement that it was unaware of any SEC investigation regarding any of the matters and that it would cooperate if such a situation occurred.
Shares of the company dropped 11% to $17.92 in premarket trading on Monday.
The SEC has carried out interviews in recent months about B. Riley and its relationship with Brian Kahn, Bloomberg reported on Sunday, citing people familiar with the matter.
Kahn is one of two co-conspirators named by co-founder of hedge fund Prophecy Asset Management John Hughes who last year pleaded guilty to securities fraud, Bloomberg had earlier reported.
B. Riley reiterated on Monday that it “had no involvement with, or knowledge of” matters relating to the Prophecy investigation. It first learned about the investigation in November last year.
SEC officials have been scrutinizing how Kahn led a buyout of Vitamin Shoppe owner Franchise Group last year in a deal arranged by B. Riley, Bloomberg reported. It added that Nomura partly financed the transaction, with some of Kahn’s assets pledged as collateral.
A spokesperson for the SEC said the agency “does not comment on the existence or nonexistence of a possible investigation.”
(Reporting by Akanksha Khushi in Bengaluru; Editing by Rashmi Aich)
