LA Times report notes that B. Riley Financial and Chairman Bryant Riley are fully cooperating with the SEC
LOS ANGELES — Bankruptcy court documents show that B. Riley Financial, its chairman, Bryant Riley, and former Franchise Group CEO Brian Kahn each were served subpoenas from federal regulators seeking additional information relating to FRG.
In the case of B. Riley Financial, the SEC is seeking more information relating to Riley’s pledge of B. Riley shares as collateral for a personal loan to Kahn, according to reporting in the Los Angeles Times. B. Riley was also served subpoenas by the SEC in July for information regarding dealings with Kahn.
B. Riley Financial and Riley are “responding to the subpoenas and are fully cooperating with the SEC,” according to the Times. As the firm points out, the subpoenas do not mean the SEC has determined any violations of law have occurred.
B. Riley Financial and Bryant Riley helped Kahn take FRG private in a $2.6 billion deal in September 2023. FRG filed for bankruptcy in November last year, which led to huge losses at B. Riley, including the $200 million loan B. Riley extended to Kahn secured against FRG shares, according to court documents.
Kahn was also served a subpoena this week by the Justice Department’s bankruptcy division, according to reporting from Bloomberg Law. That report ties the subpoena to Kahn’s interactions with the law firm Willkie Farr & Gallagher, which represents FRG in its bankruptcy proceeding and has also advised or otherwise represented Kahn, B. Riley Financial and Vintage Capital Management, another Kahn company.
The U.S. Trustee’s office is seeking to disqualify Willkie Farr & Gallagher from representing FRG because the firm advised B. Riley and Kahn in the 2023 take-private buyout. Also challenging Willkie’s involvement in the bankruptcy is the Settlement-Related Liquidating Trust, which filed a lengthy objection on Jan. 3 that details what it describes as “longstanding, concurrent and often conflicted representation of Brian Kahn and his affiliated entities” by the law firm.
The motion states that Willkie represented both FRG and Kahn simultaneously until sometime in October 2024. Kahn stepped down as CEO in January 2024. Citing section 327(a) of the Bankruptcy Code, the motion argues that Willkie cannot be retained because it is not disinterested and has interests adverse to the debtors’ estates. According to declarations that are part of the FRG bankruptcy, Willkie disclosed that it is currently representing B. Riley Financial, as well, in connection with “certain ongoing litigation matters, including securities class action lawsuits.”
A quick check this week showed Willkie continuing to represent the debtors.
Also this month, two former Franchise Group executives got the court’s final approval to acquire nearly 30 leased American Freight stores for an aggregate $1.12 million, according to reporting from Bloomberg News. A new judge assigned to the bankruptcy, Judge Laurie Silverstein, who replaced James Dorsey this week, approved the sale to Michael S. Piper and Brent Turner, who formed AF Newco to make the acquisition. Each is a former officer at Liberty Tax. The deal includes a distribution center.
FRG sold Liberty Tax to NextPoint Acquisition in summer 2021 for approximately $250 million.
The 28 store locations are in Florida (8), Georgia (4), Ohio (3), Kentucky (3) and Michigan (2). One store each is in Illinois, Indiana, Missouri, New York, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia. The distribution center is in Michigan.