Franchise Group CEO said to be named as co-conspirator in fraud

John Hughes, a co-founder of Prophecy Asset Management, pleaded guilty last Thursday to conspiracy to commit securities fraud in federal court in New Jersey and admitted to defrauding clients of $294M, reported Bloomberg’s David Voreacos. In addition to co-founding the New York-based fund, Hughes served as Chief Operating Officer and Chief Compliance Officer of Prophecy, which operated from January 2015 to March 2020, according to prosecutors. Hughes said he worked with two co-conspirators and although prosecutors haven’t identified the co-conspirators, a person familiar with the matter said they were Prophecy CEO Jeffrey Spotts and Franchise Group Inc. CEO Brian Kahn, Bloomberg reported. In August 2023, Franchise Group announced that a buyer group including members of the senior management team of the company, led by Brian Kahn, in a financial partnership with a consortium that includes certain of Brian Kahn’s affiliate entities, B. Riley Financial, Inc. and Irradiant Partners, successfully completed its acquisition of Franchise Group. In Monday morning trading, shares of B. Riley Financial are down over 8%.