Tr?id=566623520170033&ev=PageView&noscript=1

ÍøÆØ³Ô¹Ï

SEC Sues Former Franchise Group CEO Over $350 Million Hedge Fund Fraud

Posted on October 30th, 2025 at 2:32 PM
SEC Sues Former Franchise Group CEO Over $350 Million Hedge Fund Fraud

From the desk of Jim Eccleston at ÍøÆØ³Ô¹Ï

The Securities and Exchange Commission (SEC) filed a lawsuit against Brian Kahn, former CEO of Franchise Group Inc., alleging he defrauded investors of more than $350 million in a multi-year investment adviser fraud tied to the collapse of Prophecy Asset Management (Prophecy).

ThinkAdvisor reports that the SEC claims that Kahn, along with Prophecy co-owners Jeffrey Spotts and John Hughes, deceived investors by misrepresenting the fund as a low-risk investment vehicle. Instead, the defendants allegedly used fabricated documents to conceal sham transactions and massive trading losses.

According to the SEC, Prophecy told investors that their capital was allocated to “highly liquid” U.S. equities traded by multiple sub-advisers who maintained cash collateral for losses. In reality, most of the funds allegedly went to Kahn, who suffered “massive trading losses” far exceeding his contributions. According to ThinkAdvisor, Prophecy also invested in illiquid entities controlled by Kahn after performing “little to no due diligence,” the SEC said. Kahn’s alleged role in the scheme triggered broader fallout involving B. Riley Financial Inc. and its chairman, Bryant Riley, who had partnered with Kahn in several ventures, including Franchise Group—a now-bankrupt conglomerate of retail brands. Civil filings claim that Kahn used funds tied to the Prophecy fraud to help finance the company.

According to ThinkAdvisor, Kahn stepped down as CEO of Franchise Group in January 2024 amid the firm’s financial collapse. He has consistently denied wrongdoing, claiming he was also a victim of Prophecy’s failure. Riley and his firm have received civil subpoenas from the SEC, but maintain they did not know about Kahn’s conduct.

 

ÍøÆØ³Ô¹Ï LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, sec

Return to Archive

TESTIMONIALS

Previous
Next
Quotes Bigger

If the regulators are after you, and are trying to make a case against you, and you are going to contest their allegations against you, make sure you have the best securities industry defense lawyers, ÍøÆØ³Ô¹Ï Firm. My case was spun into a combination of penalties including fines, cash settlements, CE courses and suspension. They were the best I have seen in action. When all was said and done, they had done their magic, my situation was negotiated and settled with a simple "letter of caution" and a case closed without action. It is the most important legal business decision you will ever make, make it ÍøÆØ³Ô¹Ï.

Rick R.

LATEST NEWS AND ARTICLES

1783615970 Law
July 9, 2026
FINRA Suspends Former Branch Manager for Supervisory Failures Linked to Excessive Trading and Churning

A former regional branch manager at a broker-dealer has agreed to Financial Industry Regulatory Authority (FINRA) sanctions after the regulator found that he failed to supervise registered representatives who engaged in excessive trading and churning of customer accounts.

1783525964 Law
July 8, 2026
SEC Sanctions David Lerner Associates for Regulation Best Interest Violations

David Lerner Associates has agreed to settle Securities and Exchange (SEC) charges alleging violations of Regulation Best Interest (Reg BI) that resulted in unnecessary costs to retail investors, according to InvestmentNews.

1783434190 Law
July 7, 2026
Private Credit Funds Face Mounting Redemption Pressure as Investor Sentiment Shifts

A surge in investor redemption requests has intensified pressure on private credit funds, raising concerns about liquidity and long-term stability across the asset class, as reported by The Wall Street Journal.