Kris Bortnovsky, a former Miami-based hedge fund manager and co-founder of Sakal Capital Management, was arrested Friday after federal prosecutors revived an insider trading case.The case had been shelved in 2022 following a key witness’s withdrawal from a cooperation agreement.

prosecutors in Boston allege that Bortnovsky made over $4 million through illegal trading based on privileged information. This information allegedly came, in part, from David Schittentein, described as a friend whose family held stakes and managerial positions in retail companies, including Designer Brands, formerly known as DSW.

Schittentein, a Florida entrepreneur, was sentenced to a year in prison in 2023 after admitting his role in the insider trading scheme. His admission led to previous charges against Bortnovsky and another individual.

Initially, Schittentein agreed to testify against Bortnovsky and the other man but later withdrew his cooperation, leading to the dismissal of the case against them in December 2022. However, authorities reserved the right to reopen the case, citing ongoing investigations. On Friday, they revealed that three other individuals involved in the scheme had recently confessed.

New Charges Include Obstruction of Justice

“The prosecution claims that Bortnovsky,while he was in temporary freedom,would follow Schottentein in a Orthodox synagogue he frequented.”

The indictment unsealed on Friday charges Bortnovsky with financial fraud and obstruction of justice. Prosecutors allege that in March 2022, while on pre-trial release, Bortnovsky intimidated Schittentein, identified in the indictment as “CC-1.”

The prosecution claims that Bortnovsky followed Schittentein to an Orthodox synagogue and, wearing dark sunglasses, stared at him in an attempt to influence his testimony.

Neither Bortnovsky’s nor Schittentein’s lawyers have responded to requests for comment.

Details of the insider Trading Conspiracy

Prosecutors stated that between 2017 and 2019,Bortnovsky conspired with Schittentein and others to exchange confidential information related to financial results and mergers and acquisitions involving companies such as Designer Brands,Aphria Inc.,and Rite Aid.

Schittentein allegedly received information from a relative who was a member of the Board of Directors of DSW and Green Growth Brands, which unsuccessfully attempted to acquire aphria. Additionally, a company associated with the Schottenstasin family was involved in a failed merger involving Rite Aid.

The indictment also alleges that Bortnovsky traded on information received from another person regarding a potential acquisition of the furniture store chain At Home Group by a private equity firm in 2017 and 2019, profiting from the negotiations.