SEC sues Brian Kahn over Prophecy hedge fund collapse
The US Securities and Exchange Commission has filed a civil fraud lawsuit against former Franchise Group chief executive Brian Kahn over the collapse of hedge fund Prophecy Asset Management, while federal prosecutors have brought criminal charges against one of the fund’s executives, according to a report by Bloomberg.
The US Securities and Exchange Commission has filed a civil fraud lawsuit against former Prophecy Asset Management chief executive Brian Kahn. Bloomberg reports that the SEC alleges Kahn and Prophecy executives engaged in a multi-year investment adviser fraud causing over $350 million in investor losses. Separately, federal prosecutors have charged one Prophecy executive with criminal wrongdoing.
The case centers on allegations that Prophecy, Kahn and co-owner Jeffrey Spotts misrepresented investment risks to clients. Investors were told their money would be placed in low-risk US equities when in reality, fabricated records concealed sham transactions and a large portion of funds went into illiquid investments. Spotts was indicted on wire fraud, securities fraud and conspiracy charges, facing up to 20 years in prison.
Spotts' attorney says he denies wrongdoing. Kahn has also been accused of using fraud-fund money for other business dealings, including Franchise Group, which filed for bankruptcy in 2024.
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