‘U the Man’: DOJ Probes Brandon Charnas for Insider Trading (1)

Brandon Charnas, already famous for being married to a social media icon, and infamous for refusing to cooperate with an insider-trading probe, is advancing into notoriety.

Not only is the US Securities and Exchange Commission looking at the $385,000 the regulator says he made using potentially non-public information about a bid by Staples for rival Office Depot. Now the Justice Department is pursuing a criminal investigation into the trades, according to people with knowledge of the matter.

Charnas and nine other people — including a hedge fund manager, a real estate developer and the former head of a woman’s fashion brand — have been caught up in the insider trading probes, according to court documents and people familiar with the investigations.

Charnas is best known as the husband of Arielle Charnas, the founder of the beleaguered fashion brand Something Navy. The roots of the investigations date back to just before Christmas 2020, when Charnas met friends for lunch in Miami.

More than an hour later, Charnas invested $31,000 in Office Depot call options, essentially betting that the stock would rise, according to the SEC. In the days following, Charnas and other traders bought options and shares of the parent company, ODP Corp., according to the regulator.

On Jan. 11, 2021, the stock popped after Staples announced its offer. “You’re welcome boyz,” one of the traders texted in a group chat. “U the man,” another message read, according to SEC court documents.

Arielle and Brandon Charnas in 2019.

Photographer: Jamie McCarthy/Getty Images

The SEC court case centers on a subpoena fight between the agency and Charnas, who co-founded a real estate firm. According to court documents, the SEC mentioned the names of other individuals whose names have come up as part of a request for Charnas to hand over text messages.

While the SEC probe attracted widespread social media interest, the involvement of the DOJ hasn’t been previously reported. The criminal probe is in its early stages and it isn’t clear how long the investigation will last and whether it will result in any charges.

“Brandon did not engage in insider trading. Period,” David Axelrod, a lawyer for Charnas, said in a statement. Both the DOJ and SEC declined to comment.

Meanwhile, the SEC has faced setbacks. Charnas, who has also been represented by Donald Trump attorney John Lauro, won a ruling in Florida that prevents the SEC from obtaining his text messages. The agency is appealing.

Subpoena Fight

Arielle Charnas amassed a following of about 1.3 million Instagram users posting photos of herself wearing trendy outfits in New York City. Her clothing line garnered millions of dollars in funding.

But in just a few years, the couple has faced unwanted publicity as media reports surfaced about Something Navy’s financial troubles and the possibility of it being sold in a fire sale. The brand was once valued at $100 million, according to Business Insider.

The subpoena fight has drawn interest from some TikTok and Reddit users who track the couple’s every move. In November, a photo of Charnas flying coach in the middle seat prompted messages from the Reddit group, r/NYCinfluencersnark. “How the mighty have fallen,” wrote one user.

Details about the SEC probe were contained in part of a draft subpoena the regulator sent to Charnas’ attorney in August 2023. Lauro and Axelrod included an excerpt in a court filing in Florida as part of their fight against giving the SEC the information.

The item was redacted after the SEC said it “outed other people who are under investigation,” according to a transcript of a court hearing. The court filings didn’t include specific details on which individuals were under investigation. Bloomberg News downloaded the documents before the redactions were made.

Exhibit from July 25, 2023, court filing.

Source: FLSD US Attorney’s Office

The first and last names in the draft subpoena, which weren’t listed together, are part of search terms the SEC flagged in relation to messages they are seeking from Charnas.

Nine Others

Some of the traders linked to the search terms have known Charnas for years. One, Brett Mufson, was in Charnas’ 2007 graduating class at the University of Pennsylvania.

Brett Mufson during the Fontainebleau Las Vegas Grand Opening on Dec. 13.

Photographer: Denise Truscello/Getty Images

Mufson is president of real estate developer Fontainebleau Development. He is also on the board of Charnas’ real estate company, according to his bio at Pioneer Communities LLC, where he is head of the investment committee. A lawyer for Mufson declined to comment.

The draft subpoena also sought messages referencing Jesse Cole, the former chief executive of New York-based fashion brand Haute Hippie. Cole’s venture capital firm invested in Something Navy. In addition, it mentioned Stefano Santoro, who Charnas hired in 2020 to expand his business into South Florida. Both Cole and Santoro declined to comment.

Jesse Cole (center) at a Haute Hippie party in New York City.

Photographer: Joe Corrigan/Getty Images

Kris Bortnovsky, a hedge fund manager whom prosecutors investigated in a separate insider trading case, is also mentioned in the search terms including his nickname, “Bort,” which he uses on his LinkedIn page. Bortnovsky said he didn’t trade ODP and hasn’t been contacted by regulators.

“I have absolutely nothing to do with this matter,” he said.

In December 2022, the US Attorney’s Office in Massachusetts dropped charges against Bortnovsky in the previous case after another defendant pulled out of a cooperation agreement.

At least six individuals communicated with Charnas around the time of the Office Depot trades, the SEC said in court records. One unidentified person, who held 1,351 calls over seven months with Charnas, has provided sworn testimony, it said. The regulator said it discovered 462 iMessages between that person, Charnas and another trader. In addition, other people handed over their messages, the SEC said.

A day after Staples announced its $40 a share bid for ODP, Charnas sold half of his call options, generating a 635% windfall, according to the SEC. On Feb. 23, 2021, his phone blew up with news that there was “unusual trading activity” in Office Depot ahead of earnings.

“Wow,” wrote one of the traders, “moving markets!”

“Wow,” Charnas responded.

“I’m in for tomorrow,” texted an individual.

Ultimately, Staples’ proposal failed as ODP worried about antitrust scrutiny after a similar attempt collapsed in 2016. But Charnas walked away a winner with a $385,000 profit, court records show.

(Updates with details on text exchanges in 24th paragraph.)

--With assistance from Austin Weinstein and Chris Strohm.

To contact the reporter on this story:
Sabrina Willmer in Washington at swillmer2@bloomberg.net

To contact the editors responsible for this story:
Anthony Aarons at aaarons@bloomberg.net

Sara Forden

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