Brian Kahn: Vintage, Franchise Group and the Prophecy case

analysisAccording to Franchise Group's July 2023 merger proxy, Brian R. Kahn had been FRG's president and chief executive officer since 2019, a director since 2018 and investment manager of Vintage Capital Management LLC since 1998. He controlled Freedom VCM Holdings, LLC, FRG's indirect parent after the merger, and Freedom VCM Interco Holdings, Inc. as their sole director and executive officer, and was President of Vintage Opportunity Partners, L.P. He signed the final Schedule 13E-3 amendment of August 21, 2023 as President of Freedom VCM, Inc., Freedom VCM Holdings, LLC and Freedom VCM Interco Holdings, Inc. and as Manager of Vintage Opportunity Partners, L.P. and Vintage Capital Management LLC. ^{1 2}

analysisSEC records add his ownership of the Vintage firms and other board seats. Vintage Capital Management, LLC is a Delaware company (EDGAR CIK 0001511498) that reported to the SEC as an exempt reporting adviser; its Form ADV report of February 29, 2016 lists Kahn as manager, member (5–10%) and control person since April 2010, Kahn Capital Management, LLC as a member owning 75% or more since April 2010 and Andrew M. Laurence as a manager, and for Kahn Capital Management it lists Kahn as the member owning 75% or more and control person since December 1999 (dates as recorded in that report). Kahn's EDGAR owner record lists reports for Liberty Tax, Inc. (now Franchise Group, Inc.) as director, 10% owner and chief executive officer, the latest dated October 23, 2019, and for Babcock & Wilcox Enterprises, Inc. as director and 10% owner, dated August 13, 2019, among other issuers. ^{3 4 5}

analysisIn Amendment No. 24 to their Schedule 13D, for the event of August 21, 2023, Vintage Capital Management, LLC, Kahn Capital Management, LLC and Kahn reported that after the merger they no longer owned FRG shares; Kahn signed for both companies as Manager. B. Riley's 2025 annual report states that at the closing Freedom VCM managers exchanged their FRG equity for a combined 35% voting interest, of which Kahn, his spouse and one of his affiliates held 32%, and that B. Riley held a first-priority security interest in a 25% equity interest of Kahn in Freedom VCM securing the loan to a Kahn affiliate. B. Riley's filings state that Kahn was chief executive officer and a board member of Freedom VCM at December 31, 2023 and resigned both positions on January 22, 2024; its 2026 quarterly report identifies the company as Freedom VCM, Inc. ^{1 2 3}

analysisAccording to the class plaintiffs' amended complaint against B. Riley Financial, as summarized by the court on December 12, 2025, from 2017 Kahn also worked as a sub-adviser to Prophecy Asset Management and was allocated the vast majority of its capital; Prophecy filed an arbitration claim against him in May 2020, in which he reportedly agreed to repay $200 million to investors; and investors in one of two securities suits against Prophecy alleged that he moved $160 million from Prophecy into a secret side account that he used to buy his controlling position in FRG. These are allegations summarized on a motion to dismiss; the arbitration and the investor suits themselves are not among the records reviewed. ¹

analysisPress accounts differ on how the Prophecy dispute was settled. A 2024 news-agency report said the civil suit accusing Kahn of diverting Prophecy money to finance what became FRG was settled confidentially, with Kahn agreeing to pay more than $200 million, while an October 2024 newspaper report said Kahn denied wrongdoing but settled for about $70 million in arbitration; the settlement terms are not among the records reviewed. The news-agency report added that short sellers argued that, if the diversion allegation were true, Kahn had no right to transfer FRG shares to B. Riley or to pledge them to Nomura, and that none of this had been proven in public. According to the same report, B. Riley says its borrowing was sound. ^{2 3}

analysisProphecy co-founder John Hughes pleaded guilty on November 2, 2023; the U.S. Attorney's Office for the District of New Jersey later described the criminal information against Hughes as alleging a conspiracy with two then-uncharged co-conspirators. B. Riley, which had completed the FRG take-private on August 21, 2023, states that in November 2023 it learned from news reports that Kahn had been identified as an unindicted co-conspirator in criminal and civil securities-fraud charges against an executive of an unrelated hedge fund, which was Prophecy. After Hughes's plea Kahn said in a statement reported by the press that at no time did he know that Prophecy or its principals were allegedly defrauding investors, nor did he conspire in any fraud. B. Riley states that it had no involvement with, or knowledge of, any of the alleged misconduct concerning that hedge fund, Kahn or his affiliates, and that each separate review and investigation by its Audit Committee confirmed this. Kahn was charged in November 2025 and pleaded guilty on December 10, 2025 to one count of conspiracy to commit securities fraud. ^{4 5 1 3}

analysisOn September 29, 2025 the SEC sued Prophecy Asset Management, LP, its chief executive and chief investment officer Jeffrey Spotts, and Kahn, described as Prophecy's largest sub-adviser, in the U.S. District Court for the District of New Jersey (No. 3:25-cv-16058), alleging a multi-year fraud that concealed hundreds of millions of dollars of losses from investors. According to the complaint, most of the funds' capital went to Kahn, whose trading losses far exceeded the cash collateral he had contributed, and Prophecy indefinitely suspended redemptions by March 2020, after losses exceeded $350 million. The SEC charged violations of the antifraud provisions of the Securities Act, the Exchange Act and the Investment Advisers Act and sought permanent injunctions, civil penalties and officer-and-director bars against Spotts and Kahn; these are allegations in an SEC civil complaint. On November 14, 2025 the United States moved to intervene in the case and to stay it pending the related criminal cases, United States v. John Hughes (Crim. No. 23-867) and United States v. Jeffrey Spotts (Crim. No. 25-519), stating that the SEC's allegations substantially overlapped with them; the motion reported that Kahn did not object. The docket records an order on the motion to intervene on February 17, 2026 and the case as terminated on May 19, 2026. Its entries do not state the content of the February 2026 order or the reason for termination, and the retained records contain no ruling on the merits. ^{1 2 3}

analysisOn the day the SEC sued, the U.S. Attorney's Office for the District of New Jersey announced that Prophecy co-founder and chief executive Jeffrey Spotts had been arraigned on an indictment charging conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud and securities fraud, and that co-founder John Hughes had previously pleaded guilty. According to the indictment, Spotts and Hughes allocated most of the funds' capital to a single, primary sub-adviser without requiring cash collateral and did not suspend his trading although he sustained about $290 million of losses, and the scheme caused over $294 million of losses to victims. These are allegations in an indictment; the release states that the defendant is presumed innocent unless and until proven guilty, and it does not name the sub-adviser. ⁴

analysisB. Riley reports that on November 10, 2025 news reports and a court filing by the U.S. Attorney's Office for the District of New Jersey indicated that Kahn had been charged with securities fraud in connection with his activities as a Prophecy sub-adviser, and that at a hearing before the New Jersey District Court on December 10, 2025 Kahn pleaded guilty to one count of conspiracy to commit securities fraud. According to a newspaper report, an assistant U.S. attorney said at the plea hearing in Trenton that Kahn conspired to "defraud dozens of investors who had invested approximately $360 million"; the FRG Litigation Trust's complaint states that in his plea agreement (United States v. Kahn, No. 25-cr-700, D.N.J.) Kahn agreed that the losses for U.S. Sentencing Guidelines purposes were in the range of $150 million to $250 million. The charge and plea are reported in B. Riley's filings and in the press; the plea agreement and any judgment are not among the records reviewed. In its quarterly report for the period ended June 30, 2026, B. Riley stated that Kahn was awaiting sentencing. ^{5 6 7 8}