Crypto Backers B. Riley and Nomura Entangled in SEC Probe: Bloomberg

CoinDeskPolicyPublished on 2024-01-21Last updated on 2024-01-22

Abstract

A statement from B. Riley said it was unaware of any such investigation from the U.S. Securities and Exchange Commission (SEC).

Investment bank B. Riley is under an undisclosed investigation from U.S. authorities for its deals with Brian Kahn, an alleged co-conspirator in a U.S. Department of Justice criminal case, according to a Bloomberg report, citing people familiar with the matter.

A statement from B. Riley said it was unaware of any such investigation from the U.S. Securities and Exchange Commission (SEC) but that it would cooperate fully if an investigation were to materialize. The report is “parroting baseless allegations that have been publicly made for months by short sellers intent on harming the Firm,” the statement added.

Recently, B. Riley has made big investments in the bitcoin mining space. In September 2023, bitcoin (BTC) miner Iris Energy (IREN) signed a deal to sell up to $100 million in equity to B. Riley, and in March 2023, a federal judge overseeing bitcoin miner Core Scientific’s (CORZ) Chapter 11 bankruptcy process approved a $70 million loan from B. Riley Commercial Capital to help the company get back on its feet.

Advertisement
Advertisement

Brian Kahn remains unidentified. However, the Bloomberg report cited a person familiar with the matter to say that Kahn is the CEO of Franchise Group Inc. In November 2023, a man named John Hughes, co-founder of hedge fund Prophecy Asset Management pleaded guilty to committing securities fraud to the tune of $294 million against clients and admitted that one of two co-conspirators was the CEO of a multibillion-dollar retail franchise company without officially naming Kahn.

According to the report, Kahn has been a “longstanding client” of B. Riley, and the bank had helped him lead a “management buyout of Franchise Group, or FRG, a retail company based in Delaware, Ohio.” Additionally, Nomura, a major Japanese financial group, had “led a $600 million lending syndicate for B. Riley to help finance Kahn’s takeover,” the report said, citing loan documents.

Nomura is backing several crypto-related entities, including Komainu and Ledger. The report further said Nomura isn’t the focus of the probe, which is in its early stages.

The SEC did not immediately respond to CoinDesk's request for comment, while Nomura could not be reached for comment.

Read More: Core Scientific Bankruptcy Approves $70M Financing Deal From B. Riley

Edited by Parikshit Mishra.

Related Reads

Catholic And Law Enforcement Groups Warn CLARITY Act Could Weaken Crypto Crime Safeguards

A coalition of Catholic leaders, law enforcement groups, and anti-trafficking advocates warns that the CLARITY Act could weaken safeguards against crypto-enabled crime. Their criticism focuses on provisions that would protect developers of non-custodial software (like wallets and DeFi protocols) from being regulated as money transmitters. This highlights a core regulatory dilemma: distinguishing neutral software from financial intermediation. Crypto advocates argue such developers should not be treated like exchanges, while critics fear broad exemptions could hinder the tracking of illicit finance, including human trafficking and sanctions evasion. The bill aims to create clearer market-structure rules, but this opposition shows the debate extends beyond investor protection to law enforcement concerns. The pushback means supporters may need to address these issues, potentially leading to amendments or stricter requirements. For the crypto industry, clearer rules could spur U.S. investment, but the bill faces a tougher political path if framed as weakening crime-fighting tools.

bitcoinist21m ago

Catholic And Law Enforcement Groups Warn CLARITY Act Could Weaken Crypto Crime Safeguards

bitcoinist21m ago

The Full Story of How Crypto Unicorn Blockstream Is Mired in Serious Fraud Allegations

This article details serious allegations of fraud against Bitcoin infrastructure company Blockstream, founded by Bitcoin pioneer Adam Back. In June 2024, investigative account NatInfoSec published a report accusing Blockstream's mining note (BMN) program of potentially operating a multi-billion dollar scheme with Ponzi-like characteristics. The core allegations focus on Blockstream Mining Notes (BMNs), which offer investors fixed annual yields up to approximately 20% from Bitcoin mining. NatInfoSec's investigation raises several key issues: 1. **Suspicious Hashrate & Payout Capacity**: The analysis suggests Blockstream would need 20-45 EH/s of mining power to cover its BMN obligations, but its public dashboard shows only around 15 EH/s. Furthermore, no verifiable public evidence (e.g., grid connection records, import data) was found to support the massive mining operation required. 2. **Questionable Payout Source**: The BMN contract allows Blockstream to use Bitcoin from *any source* (Substitute Performance BTC) to fulfill investor payouts, raising concerns that payouts may not come from actual mining revenue. 3. **High-Risk, Fixed Returns**: Offering ~20% fixed yields in the volatile, cyclical Bitcoin mining industry is viewed as highly unusual and requires clear explanation. 4. **Undisclosed Criminal Record of Key Figure**: Christopher William Cook, a key figure in Blockstream's mining operations and CEO of spin-off Exacore, was found to have a federal felony conviction for mail fraud in 2008, a fact not disclosed in BMN offering documents. His background was also allegedly embellished. 5. **Potential Contagion to BSTR SPAC**: Questions were raised about whether these liabilities and Cook's record should have been disclosed in the SEC filings for Bitcoin Standard Treasury Company (BSTR), a separate Adam Back-associated firm planning a SPAC merger. The crypto community is divided. BitMEX Research validated Cook's criminal record and expressed concern over the high yields but found other evidence lacking or misleading, noting the legal separation between BMN, Blockstream, and BSTR. Blockstream defenders, like Samson Mow, argue the mining is real. Critics, however, emphasize the lack of independent, verifiable proof of the mining operation's scale and the true source of investor payouts. The article concludes that BMN remains shrouded in key unanswered questions regarding its actual size, the verifiability of its underlying mining assets and payouts, the source of its high yields, and the full role and disclosure concerning Chris Cook. Blockstream had not issued a comprehensive response at the time of writing.

marsbit4h ago

The Full Story of How Crypto Unicorn Blockstream Is Mired in Serious Fraud Allegations

marsbit4h ago

South Korea Targets 40 Unregistered Crypto Operators in Regulatory Crackdown

South Korea's Financial Intelligence Unit has referred around 40 unregistered virtual asset service providers to the police as part of a regulatory crackdown. Under local law, all crypto exchanges must obtain ISMS certification and FIU registration before operating, yet only 28 entities are currently registered. The FIU identified methods used by offshore platforms to attract Korean users, including advertising on local messaging apps and using private money changers to convert stablecoins. Officials stressed that unregistered platforms are not protected by Korean law. This action aligns with South Korea's push for stricter global crypto compliance through FATF measures. FIU Director Lee Hyung-joo recently urged FATF members to remove transaction thresholds for the "Travel Rule," as South Korea plans to mandate identity checks for all crypto transactions starting in August, expanding from the current 1 million won (≈$730) minimum. Regulatory enforcement has intensified in 2026, with authorities pursuing criminal cases against market manipulation schemes and enhancing cooperation with financial institutions to curb cross-border illegal transactions.

TheNewsCrypto4h ago

South Korea Targets 40 Unregistered Crypto Operators in Regulatory Crackdown

TheNewsCrypto4h ago

Trading

Spot
Futures
活动图片