An explosive shareholder lawsuit that may have played a role in the shocking suicide of Bed Bath & Beyond’s former chief financial officer Gustavo Arnal has recently run into problems of its own.
The $1.2 billion case — which accuses the home furnishings retailer, its late CFO, JPMorgan and a major investor of orchestrating a “pump and dump” stock scheme — was recently handed over to a new law firm, though legal experts question its prospects. in court, The Post has learned.
Arnal, 52, jumped to his death on Sept. 2 from the 18th floor of the “Jenga Building,”[ads1]; a sleek luxury tower in lower Manhattan’s Tribeca neighborhood, while his wife was inside the apartment, which they reportedly rented for $18,500 a month. -month. Arnal was the father of two daughters.
Meanwhile, the lawsuit — which some media reports have cited as contributing to the stress Arnal faced as CFO of the financially stricken company — was filed Aug. 23 by a Falls Church, Virginia-based attorney who is both counsel and plaintiff in the case — an unusual arrangement that usually presents a conflict of interest that would not pass muster with a judge, according to legal experts.
The lawyer, Pengcheng Si, who specializes in immigration law, declined to comment on “ongoing litigation” in an email to The Post. He also said he realizes “these are emotions[al] hell for Gustavo Arnal’s family … I would like to express my sympathy and condolences[s] for Mr Arnal[‘s] the family’s loss.”
Filed in federal court in Washington, DC, the complaint seeks class action status and alleges that Si and his wife lost $106,480 due to a scheme created by Arnal and Bed Bath & Beyond’s former largest investor, Chewy.com billionaire founder Ryan Cohen. The latter sold its shares between August 16 and 17 before the stock crashed, raising $68 million.
In the same two days, Arnal sold more than 55,000 shares worth $1.4 million, according to securities filings — transactions that the filings claimed had been part of a prearranged plan set up in April.
However, on Sept. 6, plaintiff Si hired the law firm Cohen Milstein Sellers & Toll, which specializes in class actions, to take over the case, according to a public notice.
“Once [Si] learned how the class action mechanisms work, he decided to retire as an attorney, partner Steven Toll told The Post in an interview. “He didn’t realize the challenges of being both a plaintiff and a lawyer.”
The complaint alleges that Arnal had “heavy communications” with JP Morgan and Cohen about “creating a buying frenzy of [the company’s’] stocks,” and that JPMorgan helped Arnal and Cohen “launder the proceeds of their criminal conduct.”
However, the suit does not describe how Si, an individual investor, obtained the information, notes Richard Schoenstein, a securities attorney with Tarter Krinsky & Drogin who is not affiliated with the case.
“The complaint does not disclose the source of the information about the allegations which makes it vulnerable to dismissal,” Schoenstein told The Post.
In fact, Toll said, “I have no information as to how he would have knowledge of conversations between Cohen and Arnal,” adding that Si may have “read it somewhere or heard about it from another person, or he thinks it happened .”
Elsewhere, the case erroneously named “Arnal Gustavo” as a defendant through instead of “Gustavo Arnal.” In another instance, the lawsuit refers to the plaintiff, Si, as a woman — an error that will be corrected, according to his lawyer.
Bed Bath & Beyond said in an email to The Post that it “is in the early stages of evaluating the complaint, but based on current knowledge, the company believes the allegations are without merit.” Representatives for Cohen’s investment company RC Ventures declined to comment, as did representatives for JPMorgan.
According to Si’s biography on the law firm’s website – DWS Law Group – he is also referred to as Simon P. Si. A native of China, Si’s bio says that in addition to immigration law, he “provides strategic advice on business formation, real estate, investment and international trade.”
Toll’s firm has meanwhile begun to encourage other plaintiffs to join the case. Si’s is the “first and ONLY” class action “so far,” the law firm said in a public announcement required by the SEC.
But at least there are several other major law firms fishing for investors to be part of future class action lawsuits against Bed Bath & Beyond over similar allegations.
It is not clear whether the complaints, including Sis, will replace Arnal as a defendant in the complaint with his estate, Toll said.
“The question is whether it’s a good strategic move,” Toll said, adding “you wouldn’t do it unless you thought there was a lot of money in the estate. If [the estate] is worth $10 or $50 million a lawyer needs to weigh it.”