Bed Bath & Beyond Sues Ryan Cohen for $47.2M Profit Return

GameStop's Chief Executive Officer, Ryan Cohen, is facing a legal challenge from Bed Bath & Beyond, which has filed a lawsuit against him. The lawsuit, filed in the Manhattan federal court, alleges that Cohen and his affiliated companies must return $47.2 million in profits. The lawsuit centers around the accusation that Cohen and his companies engaged in "short-term profiteering" by buying and selling more than 10% of the company's shares within a six-month period. This makes them liable to return the profits as insiders.

Cohen, who is known as the "meme king" for his role in the "meme stock" frenzy of early 2021, claims that he was unaware of his holding percentage exceeding 10% when he made the investment in March 2022. He attributes this to the company's quiet repurchase of its own stock. However, the judge, Naomi Reice Buchwald, found this argument unconvincing, stating that Bed Bath & Beyond had previously disclosed its stock repurchase plan, and it was unreasonable for Cohen not to have reviewed this information before making such a significant investment.

In August 2022, Cohen sold his shares in Bed Bath & Beyond, reportedly making a profit of $60 million. The lawsuit seeks to recover the $47.2 million in profits that Cohen made from his investments in the company. Cohen's lawyer did not immediately respond to requests for comment, nor did the lawyers for the plaintiff or GameStop, which is not a defendant in the case.

Judge Buchwald also dismissed a claim that the defendants should be held liable as "de facto directors" for avoiding a proxy fight by winning three seats on Bed Bath & Beyond's board. The lawsuit is part of a broader legal battle between Bed Bath & Beyond and GameStop, with the former accusing the latter of unfair business practices. The outcome of this legal dispute could have far-reaching implications for both companies and the broader retail industry.

Bed Bath & Beyond filed for bankruptcy in April 2023. Later, the online retailer Overstock.com acquired its name and trademark, renaming it Beyond. In June of last year, another judge dismissed a similar lawsuit filed by former Bed Bath & Beyond shareholders against Cohen, stating that the company's bankruptcy made their claims moot. The case is titled 20230930-DK-Butterfly-1 Inc. v. Cohen et al., and is being heard in the U.S. District Court for the Southern District of New York, case number 24-05874.