July 15, 2024

B. Riley Faces U.S. Authorities’ Probe While Binance Locks Horns with SEC Again


B. Riley, the investment bank that recently ventured into the bitcoin mining sector, is reportedly under investigation by U.S. authorities over its dealings with Brian Kahn, an alleged co-conspirator in an ongoing U.S. Department of Justice criminal case. According to Bloomberg, sources familiar with the matter have revealed that the undisclosed investigation is examining B. Riley’s transactions with Kahn, the CEO of Franchise Group Inc.

While the details of Kahn’s alleged involvement in the criminal case remain undisclosed, B. Riley has denied any knowledge of an investigation by the U.S. Securities and Exchange Commission (SEC). In a statement, the bank expressed its readiness to fully cooperate if an investigation were to materialize. B. Riley dismissed the Bloomberg report as echoing baseless allegations made by short sellers with the intention of harming the firm.

The investment bank has recently made significant investments in the bitcoin mining space. Notably, in September 2023, B. Riley inked a deal with bitcoin miner Iris Energy to purchase up to $100 million in equity. Additionally, the bank approved a $70 million loan to bitcoin miner Core Scientific as part of its Chapter 11 bankruptcy recovery.

Brian Kahn, identified as a “longstanding client” of B. Riley, reportedly led a management buyout of Franchise Group with the bank’s assistance. Nomura, a major Japanese financial group, played a role in financing Kahn’s takeover by leading a $600 million lending syndicate for B. Riley, according to loan documents cited in the Bloomberg report. Nomura, which is not the focus of the ongoing probe, is known for backing various crypto-related entities, including Komainu and Ledger.

The investigation adds a layer of complexity to B. Riley’s recent foray into the crypto and bitcoin mining space, highlighting potential challenges and risks associated with financial dealings in the evolving cryptocurrency landscape.

In a separate development, the U.S. Securities and Exchange Commission (SEC) defended its authority to oversee certain cryptocurrency assets in court as Binance, the world’s largest crypto exchange, sought the dismissal of the regulator’s case. Binance faces allegations from the SEC of breaking its rules, committing fraud, and artificially inflating trading volumes. The outcome of these legal battles may influence the SEC’s jurisdiction over the crypto sector and clarify regulatory boundaries in the evolving digital asset landscape.

Financial Desk

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