This is the third part in our series analysing this summer’s meme stock favourite, BBBY.
Our first instalment went into a previously-unknown element behind the rise of GameStop (GME) stock in late 2019 (unknown to the mainstream at least). This noted that a user called ‘namsilat’, who also appears to operate TheCorporation subreddit, had provided suspiciously well-timed advice on the purchase of GME stock hours before an announced collaboration between Microsoft and the gaming retailer.
Watchers of the Bed, Bath and Beyond stock market were shocked by the tragic death of the company’s CFO, Gustavo Arnal, on September 2.
Leading the news coverage of his death were reports that an individual, Pengcheng Si, had filed a class action lawsuit against Arnal and Ryan Cohen, co-founder of Chewy.com and former BBBY investor. This ongoing lawsuit filed August 23 alleged the late CFO and Ryan Cohen, together with JP Morgan, had engaged in a “pump and dump” scheme – and seeks to recoup a whopping $ 1.2 bn in damages.
Major media outlets connected the lawsuit with the stress that allegedly caused Arnal to plunge to his death.
The lawsuit is part of a series of accusations against Cohen, claiming he engaged in a pump and dump of BBBY stock. A good summary of these general claims can be found here.
The suit states Cohen would drive up interest while Arnal ensured insiders wouldn’t flood the market with stock. It further alleges that Arnal was in communications with both Cohen and JP Morgan to create a “buying frenzy of the company’s stock,” and the American bank was responsible for “laundering the proceeds of (Arnal and Cohen’s) criminal conduct”. (For our summarised timeline of these events, including the lawsuit, please see our segment on Spot Markets Live.)
However, recent news coverage has shone a light on this lawsuit, which appears to contain some oddities.
For one, Pengcheng Si is an attorney based in Falls Church, Virginia. Despite his status as an attorney, Si filed the lawsuit as both counsel and plaintiff in the case. The New York Post spoke with legal experts who called the move “an unusual arrangement that typically presents a conflict of interest that wouldn’t pass muster with a judge”.
As of September 6, Si appears to have hired Cohen Milstein Sellers & Toll to take over the class-action litigation; “he wasn’t aware of the challenges of being both a plaintiff and counsel”, the legal firm’s partner told the New York Post.
Si does not outline the source of the information for his allegations either, notching up another risk for the suit to be dismissed. The lawsuit also incorrectly named Gustavo Arnal as Arnal Gustavo, and referred to the plaintiff (Si) as a female in another instance. For now, it is also the only investor’s lawsuit against the firm – though the New York Post outlines some law firms are “fishing for investors to be a part of future class action lawsuits against Bed Bath & Beyond over similar allegations.”
Lastly, BBBY told the Post that it “is in the early stages of evaluating the complaint, but based on current knowledge the company believes the claims are without merit.”
The Curious Incident of the Lawsuit in the Night-Time
To The Blind Spot, such conduct smells off.
Browsing through the lawsuit, it is filled with typos and mistakes – many of which weren’t noted by the New York Post. Here’s a sample sentence displaying just one example of the simple grammatical mistakes found throughout;
In addition, JPM knew, and pursuant to Federal rules and regulations and New York banking laws that Gustavo and Cohen was corporate insider of BBBY and control shareholder, and that in (…)
The lawsuit (filed August 23) also reiterates Cohen’s sale of BBBY stock on August 16 on several occasions. But in one instance, it incorrectly states that JP Morgan dumped Cohen’s shares on August 26.
Also curious is the fact that the lawsuit claims Cohen pocketed $ 110mn from his sale. Every other outlet claims, to the contrary, that Cohen ‘only’ made $68.1 mn out of a total $189 mn position. Coincidentally, the $110 mn figure is identical to public estimates of the profit reaped by student Jake Freeman in his own BBBY trade – though he is unnamed in the suit.
To top things off, we found Si had failed to enclose his signature on the initial complaint he filed, as well as “missing/incorrect summonses”.
That such a suit comes from a practising attorney is odd in and of itself.
That such a lawsuit could play a part in claiming the life of Gustavo Arnal, who friends and colleagues described as a strong character who was drawn to challenging positions, appears stranger still. “If he wanted an easy layup, he wouldn’t have taken the job”, said a former colleague of Arnal interviewed by Business Insider.
If we speculate, assuming it really was a suicide (no outlet claims otherwise), we are left with two major possibilities.
- The lawsuit’s sources are real, causing real pressure on the CFO. They were not disclosed in the lawsuit for unknown reasons.
- The lawsuit’s sources are BS and the suicide occurred for an unrelated, or not directly related reason.
There is also the matter of the other hospitalised person on the day of Arnal’s death. The New York Fire Department outlined that “a second person, also unidentified, was hospitalized with minor injuries, according to a spokesperson for the FDNY. Their condition is unknown.” We reached out to the FDNY for an update on the unidentified second person but received no reply at the time of publication.
Who is Pengcheng Si and What is DWS Law Group?
The New York Post characterises Si as an attorney based on a bio found on his law firm’s website – DWS Law Group, where he is called Simon P. Si. It states that Si is “a native of China (…) and provides strategic advice on business formation, real estate, investment and international trade.”
DWS Law Group currently has a website partially under construction. The ‘under construction’ notice asks visitors to check their Facebook page instead. Over on Facebook their page only contains 20 likes, however, and its linked URL redirects to this strange website;
Some sections of the DWS website are up. These present the company as having “attorneys” plural. However, clicking on either the ‘partners‘ or ‘attorneys‘ hyperlink shows only results for one founding partner, Carlos Da Rosa, and one attorney, Simon P. Si.
The website also lists one Li Weng as Counsel, though her own LinkedIn claims she stopped working there in 2018. Similarly, Carlos Da Rosa stopped working at DWS in 2019.
Our own research indicates that Si may have had a somewhat different past, and lost at least one previous lawsuit for filing unbacked claims.
In a 2014 lawsuit, we found one Pengcheng Si named as a plaintiff accusing the Laogai Research Foundation and the China Information Center of fraud under the False Claims Act. In this lawsuit, he is named as a “computer technician who once worked for (the Defendants)”.
The lawsuit was intially dismissed by the Defendants after their second petition for dismissal. The judge stated;
“the amended complaint nevertheless still lacks a sufficient factual basis for any plausible fraud claim under the FCA, and fails even to identify clearly how the alleged facts support each purported claim”.
We found a related lawsuit filed on 18 February 2022 by Pengcheng Si and Zhi Guo against the Princeton China Initiative, the Independent Chinese PEN Center, the Laogai Research Foundation, and an individual named Yu Zhang – also under the False Claims Act. The case appears to have been mentioned on Bloomberg law as well.
The lawsuit describes him thus;
“For ICPC, he performed administrative and IT-related duties, and for PCI, he was a “cashier and administrative assistant”.
We note that Si appears to have met the conditions for at least some damages in this later suit.
Si’s biography on DWS Law Group’s site does not outline that he is a computer technician, but does state that “Mr. Si has acquired significant NGO management and public sector experience”, and that “he handled False Claims Act litigation”.
We found two more footprints of Si online. One is a mailed notice of deficiency by the IRS to Si at his wife’s home in Fairfax, Virginia on June 26, 2018. Another mention is from a November 2013 Facebook post from the Independent Chinese PEN Center, which claims one Simon Pengcheng Si was a ‘scrutineer’ member of its ‘Secretariat of the Congress.’
No other online results were found for Pengcheng Si, bar a few lawyer aggregation and review service sites, which contain no reviews of Si.
We have reached out to Pengcheng Si, JP Morgan, and Ryan Cohen and received no response. We will update the article should they respond.
Watch this space as The Blind Spot figures this quagmire out!
