Bed Bath & Beyond: Pump-and-Dump Claims Add Fuel to the Raging Fire

A disgruntled shareholder is suing Bed Bath & Beyond (BBBY) executives for an alleged pump-and-dump scheme. The lawsuit comes in the wake of the company’s chief financial officer, Gustavo Arnal, jumping out of a New York City window to his death.

Lead plaintiff Pengcheng Si suffered losses and is taking his complaints to the U.S. District Count of Washington D.C. He filed the lawsuit prior to Arnal’s death, though the proceedings will be posthumous.

In a class action lawsuit filed Aug. 23, the plaintiff Si makes pump-and-dump allegations against the company, JPMorgan Securities LLC, RC Ventures LLC (Ryan Cohen’s venture capital firm), former stakeholder Ryan Cohen, and the late Arnal.

The suit claims the defendants made “materially misleading statements and omissions made to investors regarding BBBY's strategic company plans, financial condition, cooperation with Cohen and RC, and reports of shares holding and selling during the [period].” It also says, “Cohen has historically employed pump and dump schemes to raise much-needed capital and has ignited several meme stocks to jaw-dropping heights.”

The suit accuses the defendants of “creating a buying frenzy of BBBY stock to raise much-needed capital between [Arnal], Cohen, and JPM.” This buying frenzy would be the pump, and the subsequent stake sales by Cohen and Arnal would be the dump.

Si reportedly suffered losses of $106,480 on BBBY stock, suggesting pump and dumps by top executives is at the center of those losses. Through the lawsuit, Si aims to restore those funds as damages paid, though the reality of that outcome will be up to the court.

The lawsuit goes into great detail about an alleged thoughtful scheme that BBBY’s top executives and investors conducted in cahoots. Here’s what it says:

“Cohen approached [Arnal] about his plan to accumulate shares of BBBY and to assume command of the company’s public float. Cohen convinced Gustavo that their plan would be a mutually beneficial one. With control over a significant portion of the public float, Cohen would essentially act as a price support for the stock while [Arnal] would act in a similar capacity by controlling the sale of shares by insiders. Under this arrangement, defendants would profit handsomely from the rise in price and could coordinate their selling of shares to optimize their returns.”

While this is plausible, the plaintiff or investigating agencies like the SEC will need to produce tangible evidence this was the case.

Julie Strider, company spokesperson, told reporters in response to the allegations, "The company is in the early stages of evaluating the complaint but based on current knowledge the company believes the claims are without merit.”

Arnal sold about $1 million worth of BBBY shares two weeks prior to committing suicide by jumping out of the 18th floor of an NYC high rise. BBBY announced layoffs and store closures in late August amid an ongoing turnaround effort. Former CEO Mark Tritton departed earlier this summer.

BBBY shares are down 15.4 percent by mid-day market open on Sept. 6, the first trading day following the news of Arnal’s death.