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JPay Founder Ryan Shapiro Indicted for Securities Fraud

by Kevin Bliss

On January 6, 2022, Ryan Shapiro, the 44-year-old founder of prison financial services firm JPay, was charged in federal court in Boston with conspiracy to commit securities fraud. Also named in the criminal complaint was Shapiro’s friend and neighbor in Florida, hedge fund manager Kris Bortnovsky, 40.

JPay was acquired in April 2015 by prison communications giant Securus Technologies, Inc. Both are now subsidiaries of Dallas-based Aventiv Technologies.

A third defendant, referred to in the probable cause affidavit as ‘Cooperating Witness 1’ (CW-1), provided incriminating evidence against the other two in return for leniency. The charging complaint lists a third defendant, David Schottenstein, 38, identified by the Miami Herald as a “member of one of America’s richest families.”

In a signed affidavit, CW-1 swore that he supplied insider information that Shapiro and Bortnovsky used to profit from the stock market on three separate occasions:

• just before a strong earnings report issued on August 22, 2017, by DSW, whose board includes two of Schottenstein’s cousins;

• just before a merger was announced on February 20, 2018, between Albertson’s and Rite-Aid, of which the same cousins had insider knowledge; and

• just before a hostile—and ultimately unsuccessful—takeover of Canadian marijuana distributor Aphria was announced on December 27, 2018, by Green Growth Brands, of which one of the same cousins had insider knowledge, as well.

Illegally using their insider information, Shapiro and his co-defendants allegedly made advantageous stock trades that earned profits totaling $121,000 for the JPay founder, $600,000 for Schottenstein and $3.56 million for Bortnovsky and his Sakal Fund. See: Securities and Exchange Commission v. Schottenstein, USDC (D. Ma.), Case No. 1:22-cv-10023.

It’s not the first time the whiff of corruption has tainted Shapiro’s aura. He came under scrutiny in 2016 during a larger examination into contracts signed by the New York City Department of Corrections (DOC) with JPay and Western Union, both of which bypassed state bid-procurement procedures. The city’s then-Public Advocate, Letitia James—currently the state Attorney General—asked the state Department of Investigation look into the awards.

“We need full transparency and accountability into how these contracts have been settled and executed, and whether any laws were broken,” she said.

The contracts appear to violate New York City law, which restricts money-transfer fees charged to prisoners and their families to a maximum of $5.00 per transaction, while JPay charges $6.95 for transfers of $20 to $100 and Western Union charges the same for transfers of $30 to $75. But the state Corrections Department has granted both companies a variance to the law annually since 2010, according to Bronx Justice News.

Shapiro is also a member of The Shul, a synagogue in Bal Harbor, Florida, where he serves on its executive board and is a mentor for the congregation’s chapter of the Solomon Leadership Program (SLP). A fellow member, Murray Huberfield, was sentenced in June 2021 to a seven-month prison term for his role in a bribery scandal that also earned a 58-month prison stint for the long-time President of the New York Corrections Officers’ Benevolent Association (COBA), Norman Seabrook. Huberfield pleaded guilty to paying Seabrook a $60,000 bribe in return for an investment of $20 million of union money in Huberfield’s hedge fund. Huberfield then donated $125,000 of that money to The Shul. Shapiro denies any ties.

“Just because you assume they practice in the same religious establishment and live in similar neighborhoods does not mean they have any type of relationship,” chided Jade Trombetta, Shapiro’s spokesperson.

Yet others are not convinced. As one DOC insider told the New York Daily News:

“All of these coincidental circumstances remind me of Arsenio Hall’s catchphrase, ‘Things that make you go hmm.’”

The Shul features predominately in many of Shapiro’s business transactions. He serves on the executive board, which received Huberfield’s $125,000 donation. Another synagogue member, Errol Feldman, helped start JPay, eventually taking over as CEO in 2016. Feldman was also listed as a SLP mentor, with a bio on the program’s website that states he “was able to navigate a variety of complex regulatory landscapes” for JPay “while making sure the company never stopped moving forward.”

The Shul also hosts the Aleph Institute, which provides prison ministry services to Jewish prisoners around the country. Shapiro served as vice president of the Aleph Institute for several years, until around 2014.

Shapiro’s SLP bio boasts that JPay “has transformed much of how US prisons operate today.” It also says he is currently working on “a secretive startup creating the world’s first 4G LTE wearable products,” as well as investing “in emerging technologies, with a heavy focus on Agritech companies.”

SLP’s homepage states that mentors are “handpicked, not only for their personal success, but for their outstanding values and exemplary moral conduct.” But the SEC’s sworn federal complaint—which says Shapiro lied about his acquaintance with Bortnovsky and about illegally trading stock on insider information—just might give the lie to that claim.  

Additional sources: Bronx Justice News, Miami Herald, New York Daily News, Solomon Leadership Program

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Related legal case

Securities and Exchange Commission v. Schottenstein