B Riley says review found no involvement in alleged Prophecy Asset misconduct

(Reuters) - Shares in U.S. brokerage B Riley Financial jumped 17% on Thursday after it said an internal review found the company had no knowledge or involvement in alleged misconduct at Prophecy Asset Management.

The boutique Los Angeles-based investment bank has been under investor and media scrutiny due to its investment in Vitamin Shoppe-owner Franchise Group when it was taken private by a management-led buyout in 2023.

Bloomberg News reported in November that Franchise's former CEO, Brian Kahn, was a co-conspirator in a securities fraud involving Prophecy Asset Management.

Kahn has previously denied the allegations made in the report, saying he never knew that Prophecy was allegedly defrauding investors. Prophecy collapsed in 2020.

B Riley said it had engaged law firm Sullivan & Cromwell to conduct the review of the bank's dealings with Kahn. It confirmed that the bank and its executives, including Chairman and co-CEO Bryant Riley, had "no involvement with, or knowledge of, any of the alleged misconduct concerning Prophecy," B Riley said.

The stock was last trading at $18.10 and would snap a four-day streak of losses should gains hold throughout the trading session.

(Reporting by Niket Nishant in Bengaluru; Editing by Shinjini Ganguli, Michelle Price and Anil D'Silva)

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