Meme stock king Ryan Cohen’s ownership and sale of Bed Bath & Beyond stock that sparked frenzy is being probed by SEC a year after company CFO Gustavo Arnal plunged to his death

The US Securities and Exchange Commission (SEC) has opened an investigation into billionaire Ryan Cohen’s ownership and sudden sale of Bed Bath & Beyond shares last year.

Cohen, the so-called “meme stock king,” famously took a $120 million stake in the company, pushed for changes and hyped it up on social media, sparking a frenzy that sent the stock soaring overnight rose 34 percent.

But just days after posting positively about the company, Cohen sold his shares in August 2022, leading to its collapse. The investor, currently chairman of GameStop, made nearly $60 million from the five-month transaction.

Months later, Bed Bath & Beyond filed for Chapter 11 bankruptcy — and its CFO Gustavo Arnal, 52, died by suicide after jumping from New York City’s Jenga Tower following a shareholder lawsuit against him, the company and Cohen for a pump and dump strategy

The SEC now wants information from Cohen about his transactions and his communications with officers or directors at the household goods retailer, the Wall Street Journal reported on Thursday.

U.S. District Judge Trevor N. McFadden called the timing of Cohen’s transactions “sketchy” in a July order.

According to the newspaper, the regulator has also requested data from some current and former board members of the company.

Cohen, who is currently chairman at GameStop, had disclosed a nearly 10 percent stake in Bed Bath & Beyond in March 2022 and wanted the company to explore strategic alternatives, including an outright sale.

That same month, Bed Bath & Beyond and Cohen reached a settlement to add three new directors to the company’s board of directors, and the retailer agreed to look for alternatives to its buybuy Baby unit.

However, in August, a filing with the regulator revealed that Cohen had left his position in the company after a stunning rally during the month.

Bed Bath & Beyond and the SEC did not immediately respond to requests for comment. Cohen could not immediately be reached for comment.

SEC investigations can last years and do not always end with claims of wrongdoing.

Cohen’s investment in the company was significant because of his following among small retail investors, driven by his role in the GameStop frenzy.

Between 2020 and 2021, he encouraged traders on Reddit and other social media sites to buy shares in the video game retailer, a firm that established investors had written off.

The stock rose from $5 to over $480, giving birth to what is now known as the “meme stocks.”

Their strategy is to use a ‘short squeeze’, where those who bet on a stock are forced to buy shares to close out their position.

In September 2022, shareholders filed a lawsuit alleging that Cohen was aware of negative news about the company when he sold his stock and failed to disclose the information.

Cohen and 21-year-old math teacher Jake Freeman cashed out within 24 hours of each other in August last year – before the company’s share price plummeted at the end of that week.

Although it was Cohen’s stake in BBBY that coincided with a rise in the company’s value, it was Freeman who pulled out first and earned the lion’s share of the $180 million proceeds.

Freeman, who attended the University of Southern California, bought $25 million worth of stock in BBBY through his Wyoming-based holding company Freeman Capital.

He raised the money through friends and family, but showed extraordinary ambition and intellect from an early age.

Freeman first raised concerns about the company’s future in a letter to directors in July, warning of an “existential crisis.” He suggested that the company could address its financial problems by offering stock warrants and convertible notes to bondholders in exchange for reducing the company’s debt.

But a month later – on a day when the stock spiked above $27 a share (he had bought at $5.50) before closing at $20.65, up 31 percent – he sold his stake.

His assets at the time were reportedly worth more than $130 million.

A day later, Cohen announced that he planned to sell his 10 percent stake, acquired through his venture capital firm RC Ventures. By the end of the next day, BBBY was down 20 percent.

Arnal’s suicide came just days after the struggling retailer announced it was closing stores and laying off employees.

His wife of 28 years, Alexandra Cadenas-Arnal, was in the apartment when he suddenly jumped to his death, reports say.

It also followed news that Arnal was involved in the shareholder lawsuit over allegations of artificially inflating the company’s share price in a ‘pump and dump’ scheme.

The big box chain – once considered a so-called “category killer” in home and bath goods – has seen its fortunes falter after an attempt to sell more of its own branded goods.

In June, the bankrupt retailer was sold at auction for $21.5 million – in a deal that closed all its stores and left the brand living on in name only.