The United States has seen a significant increase in prison sentences for insider trading in recent years, with some of the longest sentences ever handed down for this white-collar crime. One notable case involves David Schottenstein, a member of a wealthy retail family with investments and leadership roles in companies such as Designer Brands Inc. (owner of DSW) and American Eagle Outfitters Inc.
In March 2023, Schottenstein was sentenced to one year in prison for insider trading, after prosecutors claimed he and two friends made $4.5 million trading on inside information he obtained from his family members.
David Schottenstein's case highlights the severity of the consequences for those involved in insider trading. Between 2017 and 2018, he made more than $600,000 trading on information he received from a relative about merger and earnings announcements involving DSW (now called Designer Brands), Aphria Inc., and Rite Aid Corp. He also tipped off Kris Bortnovsky, co-founder of hedge fund Sakal Capital Management, and Ryan Shapiro, founder of inmate money transfer service provider JPay, who both sat on the board of a Florida synagogue with Schottenstein.
Although criminal charges against Bortnovsky and Shapiro were dropped, a civil case by the U.S. Securities and Exchange Commission remains pending. They deny any wrongdoing. David Schottenstein initially agreed to cooperate and testify against his friends but backed out of his cooperation deal in November, leading to the dismissal of charges against them. His lawyers argued that anxiety made him suicidal, and home confinement would be sufficient punishment after he pleaded guilty to conspiring to commit securities fraud.
