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“Brandon did not engage in insider trading. Period,” David Axelrod, a lawyer for Charnas, said in a statement. Both the DOJ and SEC declined to comment.
Meanwhile, the SEC has faced setbacks. Charnas, who has also been represented by Donald Trump attorney John Lauro, won a ruling in Florida that prevents the SEC from obtaining his text messages. The agency is appealing.
Subpoena fight
Arielle Charnas amassed a following of about 1.3 million Instagram users posting photos of herself wearing trendy outfits in New York City. Her clothing line garnered millions of dollars in funding.
But in just a few years, the couple has faced unwanted publicity as media reports surfaced about Something Navy’s financial troubles and the possibility of it being sold in a fire sale. The brand was once valued at $US100 million, according to Business Insider.
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The subpoena fight has drawn interest from some TikTok and Reddit users who track the couple’s every move. In November, a photo of Charnas flying coach in the middle seat prompted messages from the Reddit group, r/NYCinfluencersnark. “How the mighty have fallen,” wrote one user.
Details about the SEC probe were contained in part of a draft subpoena the regulator sent to Charnas’ attorney in August 2023. Lauro and Axelrod included an excerpt in a court filing in Florida as part of their fight against giving the SEC the information.
The item was redacted after the SEC said it “outed other people who are under investigation,” according to a transcript of a court hearing. The court filings didn’t include specific details on which individuals were under investigation. Bloomberg News downloaded the documents before the redactions were made.
The first and last names in the draft subpoena, which weren’t listed together, are part of search terms the SEC flagged in relation to messages they are seeking from Charnas.
Nine others
Some of the traders linked to the search terms have known Charnas for years. One, Brett Mufson, was in Charnas’ 2007 graduating class at the University of Pennsylvania.
The SEC is investigating whether Charnas made trades using potentially non-public information about a bid by Staples for rival Office Depot.Credit: Luke Sharett
Mufson is president of real estate developer Fontainebleau Development. He is also on the board of Charnas’ real estate company, according to his bio at Pioneer Communities LLC, where he is head of the investment committee. A lawyer for Mufson declined to comment.
The draft subpoena also sought messages referencing Jesse Cole, the former chief executive of New York-based fashion brand Haute Hippie. Cole’s venture capital firm invested in Something Navy. In addition, it mentioned Stefano Santoro, who Charnas hired in 2020 to expand his business into South Florida. Both Cole and Santoro declined to comment.
Kris Bortnovsky, a hedge fund manager whom prosecutors investigated in a separate insider trading case, is also mentioned in the search terms including his nickname, “Bort,” which he uses on his LinkedIn page. Bortnovsky said he didn’t trade ODP and hasn’t been contacted by regulators.
While the SEC probe attracted widespread social media interest, the involvement of the DOJ hasn’t been previously reported.
“I have absolutely nothing to do with this matter,” he said.
In December 2022, the US Attorney’s Office in Massachusetts dropped charges against Bortnovsky in the previous case after another defendant pulled out of a cooperation agreement.
At least six individuals communicated with Charnas around the time of the Office Depot trades, the SEC said in court records. One unidentified person, who held 1351 calls over seven months with Charnas, has provided sworn testimony, it said. The regulator said it discovered 462 iMessages between that person, Charnas and another trader. In addition, other people handed over their messages, the SEC said.
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A day after Staples announced its $US40 a share bid for ODP, Charnas sold half of his call options, generating a 635 per cent windfall, according to the SEC. On February 23, 2021, his phone blew up with news that there was “unusual trading activity” in Office Depot ahead of earnings.
“Wow,” wrote one of the traders, “moving markets!” “Wow,” Charnas responded. “I’m in for tomorrow,” texted an individual.
Ultimately, Staples’ proposal failed as ODP worried about antitrust scrutiny after a similar attempt collapsed in 2016. But Charnas walked away a winner with a $US385,000 profit, court records show.
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