B. Riley Allegedly Hid Ex-Franchise Group CEO’s Suspected Fraud

B. Riley Financial Inc. and its top executives failed to tell investors that they knew, or were “recklessly unaware” of, Franchise Group Inc. ex-CEO Brian Kahn’s allegedly illicit business activities before helping him lead a management buyout of the company, according to a proposed shareholder class action.

The $2.8 billion take-private deal, which closed in August, was largely financed by B. Riley without disclosing Kahn’s alleged role in a conspiracy to defraud investors of $294 million, which drew regulatory scrutiny for the company and prompted stock declines, according to the complaint filed Friday in US District Court for the ...