by Matt Clarke

On December 5, 2022, federal prosecutors moved to dismiss insider trading charges against JPay founder Ryan Shapiro, 45. For a hefty fee, the firm provides financial and communications services to people incarcerated in jail and prisons. JPay was acquired by Securus Technologies in April 2015. Both are now subsidiaries of Dallas-based Aventiv Technologies.

Shapiro was charged with financial securities crimes in a Boston federal court in January 2022, along with his friend, founder and manager of the hedge fund Sakal Capital Management, Kris Bortnovsky, then 40, and David Schottenstein, then 38, whom the Miami Herald called “a member of one of America’s richest families.” [See: PLN, Mar. 2022, p.10.]

Schottenstein signed an affidavit swearing, under penalty of perjury, that he provided the other two men with insider information so they could illegally profit from the stock market. Schottenstein received the information from a relative, a member of the board of DSW and Green Growth Brands. The information included a pending merger not yet announced between Albertson’s and Rite-Aid, as well as a planned hostile takeover attempt by Green Growth Brands of marijuana distributor Aphria. Both the merger and takeover ultimately failed but not before their announcements briefly boosted stock prices, allowing the trio to reap huge profits: $121,000 for Shapiro, $600,000 for Schottenstein and $3.56 million for Bortnovsky, according to charging documents.

Schottenstein, who founded a designer sunglasses company, pleaded guilty in February 2022, agreeing to cooperate in the prosecution of Shapiro and Bortnovsky. But a week before prosecutors moved to dismiss those charges in November 2022, Schottenstein withdrew from the cooperation agreement, saying that testifying against his friend, Shapiro, would likely “exacerbate” his own mental health issues.

Prosecutors said this “unexpected” development made it necessary to dismiss the cases against Shapiro and Bortnovsky. However, their investigation was ongoing, they said, leaving open the possibility of bringing charges again in the future.

Meanwhile, Schottenstein was sentenced in February 2023 to a year in prison. Shapiro “will, now that this ordeal of being a federal criminal defendant is over, do great things in his professional and personal life,” according to his attorney, Martin Weinberg. Perhaps that includes finding new ways to gouge excessive profits from prisoners and their families.

It is a pity that Shapiro has, for now, missed the opportunity to experience firsthand the financial stress JPay places on prisoners and their families by charging excessively high fees to transfer money into prison accounts and provide telecommunications services. 

Source: Reuters