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Designer sunglass company founder to plead guilty to insider trading scheme

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By Nate Raymond

BOSTON, Jan 6 (Reuters) - The founder of a designer eyewear company whose family has held investments and leadership roles in many major retailers like DSW Inc has agreed to plead guilty to engaging in insider trading with two Florida men using information he learned from a cousin.

Federal prosecutors in Boston disclosed in court papers on Thursday that David Schottenstein had agreed to plead guilty https://tmsnrt.rs/3eYbhxW to conspiring to commit securities fraud and cooperate in the prosecution of a venture capital firm founder and an entrepreneur.

A lawyer for Schottenstein, the founder of designer sunglasses company Privè Revaux, did not respond to requests for comment.

Prosecutors said Schottenstein, 38, traded on inside information he learned from a cousin who sat on the boards of directors of shoe retailer DSW and cannabis products company Green Growth Brands (GGB).

Schottenstein traded ahead of a 2017 earnings announcement by DSW; the 2018 news that Albertsons Companies and Rite Aid Corp had agreed to merge; and a 2018 tender offer by GGB for Canadian cannabis-related business Aphria Inc, prosecutors said.

The cousin's family business was part of an investment consortium involved in the Rite Aid transaction, which later failed.

Schottenstein made more than $600,000 through his trades, the U.S. Securities and Exchange Commission said in a related lawsuit.

Prosecutors said Schottenstein also illegally tipped two friends - Kris Bortnovsky, the co-founder of Sakal Capital Management, and Ryan Shapiro, who founded inmate money transfer service provider JPay - to the expected news.

Authorities said Bortnovsky's traded ahead of all three announcements and Shapiro traded on tips about Rite Aid and Aphria.

The SEC said Bortnovsky made more than $4 million and Shapiro illegally reaped $121,000. They were initially charged last month and formally indicted on Thursday.

James Froccaro, Bortnovsky's lawyer, said he is innocent. Martin Weinberg, Shapiro's attorney, said he "is factually and legally innocent of today's allegations."

DSW is now part of Designer Brands Inc. GGB filed for bankruptcy in 2020 following its failed bid for Aphria. (Reporting by Nate Raymond in Boston; Editing by Bill Berkrot)

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