(Bloomberg Law) -- The company that used to be known as Bed Bath & Beyond Inc. sued Ryan Cohen and his company, RC Ventures LLC, to recover $47 million they made from alleged insider trading in 2022.
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Cohen founded the pet food company Chewy Inc. and is the chairman and chief executive officer of the video game company, GameStop Corp.
Between January and August 2022, while the defendants “were acting as BBBY’s statutory directors,” they used insider information to trade BBBY stock, according to the complaint filed Thursday in the US District Court for the Southern District of New York.
The former Bed Bath says it’s entitled to recover Cohen’s and RC Ventures’ alleged short-swing profits. Cohen and the fund “made dozens of purchases and sales of BBBY’s equity securities between January and August 2022, all of them profitable and most within a single period of less than six months,” the bankrupt entity says. The profit from those trades is recoverable under Section 16(b) of the 1934 Securities Exchange Act both because Cohen and the fund are statutory directors—acting through deputized members of the board—and because they beneficially owned more than 10% of Bed Bath & Beyond’s common stock, it says.
Those appointees on the board “prevailed in securing the Cohen Defendants significant access to material nonpublic information about BBBY,” the former retailer says.
The suit is among efforts by the company and its bankruptcy plan administrator to recover funds for its creditors. The administrator, Michael Goldberg, sued a New Jersey agency to recover $19 million worth of tax credits that he claims are owed under economic development contracts. That case is pending in the US Bankruptcy Court for the District of New Jersey.
The company is also attempting to recover more than $300 million in trading profits from Hudson Bay Capital Management, a hedge fund involved in a last-ditch financing plan that didn’t prevent the retailer’s collapse, in a suit filed in the US District Court for the Southern District of New York. The former retailer also filed this suit under the short-swing profit rule.
RC Ventures is the largest holder of GameStop Corp. shares with an 8.7% stake in the company as of June 10, according to data compiled by Bloomberg.
The company, 20230930-DK-BUTTERFLY-1 Inc., which did business as Bed Bath & Beyond Inc., seeks money damages on its short-swing trading claim, as well as costs and fees.
Cohen and RC Ventures didn’t immediately respond to a request for comment emailed to GameStop Friday.
James A. Hunter of Radnor, Pa., represents the plaintiff.
The case is 20230930-DK-BUTTERFLY-I Inc. v. Cohen, S.D.N.Y., No. 1:24-cv-05874, complaint filed 8/1/24.
To contact the reporters on this story: Bernie Pazanowski in Washington at bpazanowski@bloombergindustry.com; Martina Barash in Washington at mbarash@bloomberglaw.com
To contact the editor responsible for this story: Blair Chavis at bchavis@bloombergindustry.com
(Updated with details from the complaint and context throughout.)
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