Bed Bath & Beyond CFO who jumped to his death from New York skyscraper faced ‘pump and dump’ allegation days earlier

Gustavo Arnal, the CFO of Bed Bath & Beyond who jumped to his death from a Manhattan skyscraper last week, had faced a pump and dump charge less than two weeks earlier.

On Friday, Arnal fell to his death from the 18th floor of 56 Leonard Street, an iconic new skyscraper known as the “Jenga Building” because of its unique design. The New York medical examiner ruled the 52-year-old’s death a suicide, according to the New York Post.

The CFO’s death marks the latest chapter in a turbulent period for the troubled home goods retailer and the meme phenomenon. BBBY shares of Bed Bath & Beyond Inc.
-18.08%
skyrocketed earlier this year, but was hit hard last month after activist investor and GameStop Corp. GM,
-7.82%
Chairman Ryan Cohen revealed that he is selling a large stake in the company.

A lawsuit filed in the United States District Court for the District of Columbia on Aug. 23 alleges that Arnal and Cohen engaged in a pump-and-dump scheme involving Bed Bath & Beyond stock.

Look now: Bed Bath & Beyond falls 14% in premarket after CFO’s death ruled suicide

JPMorgan Chase & Co. JPM,
-0.34%,
listed as a financial advisor to Bed Bath & Beyond, is also named as a defendant in the lawsuit by lead plaintiff Pengcheng Si.

“From March 2022 through August 2022, Cohen, in conspiracy with Gustavo, JPM and others, engaged in a fraudulent scheme to artificially inflate the price of BBBY’s publicly traded stock,” the lawsuit states. “Based on information and belief, there were intense communications and interactions regarding the creation of a BBBY stock buying frenzy to raise the funds needed between Gustavo, Cohen and JPM.”

Si and her husband acquired a total of 8,020 shares of Bed Bath & Beyond common stock at artificially inflated prices and have suffered “realized losses and market losses” of approximately $106,480, according to the suit.

“Cohen approached Gustavo about his plan to accumulate BBBY stock and take over management of the public company,” the lawsuit states, with Cohen allegedly convincing the Bed Bath & Beyond CFO that the plan would be mutually beneficial. . “By controlling a significant portion of the public float, Cohen would essentially act as price support for the stock, while Gustavo would act in a similar capacity by controlling the sale of shares by Insiders.”

Look now: Bed Bath & Beyond stock sinks after Ryan Cohen reveals plan to offload stake. Cash remains a concern, analysts say

“Under this agreement, the defendants would benefit significantly from the price increase and could coordinate the sale of their shares to optimize their returns,” he added. “Cohen offered to buy a large stake in BBBY, including long-term options on more than 1.6 million shares of BBBY with a strike price between $60 and $80, in a classic attempt to induce a gamma squeeze, in exchange for the assurance of Gustavo that Insiders would not flood the market with shares.”

In a gamma squeeze, a price rally fuels itself when the sellers of call options, in order to hedge their positions, buy the underlying stock.

With investor interest beginning to emerge as a result of the increase in trading volume, the defendants began aggressively promoting Bed Bath & Beyond’s stock, according to the suit. Against this background, the company’s stock rose from $4.38 per share on July 1 to $30 per share on August 17, it said.

Bed Bath & Beyond told MarketWatch that it is evaluating the lawsuit. “As previously noted in the 8-K filed on Aug. 31, the company is in the early stages of evaluating the complaint, but based on current knowledge, the company believes the claims are without merit,” it said in an emailed statement. .

Look now: Bed Bath & Beyond shares extend plunge after strategy update details job cuts, stock offering and sales warning

JPMorgan declined to comment, while Cohen and RC Ventures have yet to respond to a request for comment from MarketWatch.

Last week Bed Bath & Beyond provided a strategic update that includes job cuts and store closings. The company also gave a negative sales forecast.

Early Tuesday, the company said in a regulatory filing that it named Laura Crossen, senior vice president of finance and chief accounting officer, as interim CFO.

Shares of Bed Bath & Beyond are down 50.5% this year, compared with the S&P 500’s SPX,
-0.34%
down 17.8%.

Of the 17 analysts surveyed by FactSet, five have a hold rating and 12 have a hold or sell rating on Bed Bath & Beyond.

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