DK Butterfly v. Ryan Cohen
Section 16(b) Short-Swing Profits — Transaction Analysis, Admissions Chart, and Public-Docket Status
S.D.N.Y. No. 1:24-cv-05874 — Judge Buchwald
At a Glance
Case Summary
DK Butterfly, the renamed post-bankruptcy BBBY entity administered by Plan Administrator Michael I. Goldberg, seeks disgorgement of alleged short-swing profits under Exchange Act §16(b). The plaintiff alleges that Cohen's 9,450,100 share-equivalent position exceeded 10% when measured against lower outstanding-share counts reflected by later issuer disclosures, rather than the 96.3M denominator used in his initial Schedule 13D. Cohen disputes insider status, the matching calculations, and liability.
The Core Claim: Stale Denominator
Cohen's initial Schedule 13D used a November 2021 reported share count. The SAC reconstructs a lower February 2022 denominator from BBBY's repurchase disclosures and alleges that Cohen crossed 10%.
Earlier Reported Denominator Used in 13D
From November 27, 2021 10-Q (filed January 6, 2022). Cohen's 9,450,100 shares = 9.8%. Below the 10% threshold.
Later Reported Share Count
Per the 10-Q filed June 29, 2022, for shares outstanding as of May 28. A 9,450,100 share-equivalent position divided by that count is 11.8%; the separate February 25 crossing date is the plaintiff's reconstruction.
Why It Matters
Between November 2, 2021 and end of FY2021 (February 26, 2022), BBBY repurchased approximately $400 million in shares. This was publicly disclosed before Cohen began buying in January 2022. The SAC alleges Cohen knew or should have known the 96.3M denominator was stale, and that his position had crossed the 10% threshold — triggering Section 16 insider status, Form 3 filing obligations, and short-swing profit liability.
| Date | Event | Shares Outstanding | Cohen's % | Source |
|---|---|---|---|---|
| Nov 27, 2021 | Denominator used in initial 13D | 96,337,713 | 9.81% | SAC ¶128 |
| Feb 25, 2022 | Cohen crosses 10% (alleged) | ≤81,675,122 | ≥10.22% | SAC ¶159 |
| Mar 26, 2022 | Per 10-K (filed Apr 21) | 79,845,789 | 11.84% | SAC ¶152 |
| May 28, 2022 | Per 10-Q (filed Jun 29) | 79,957,649 | 11.82% | SAC ¶153 |
| Aug 16, 2022 | 13D/A No. 2 (updated denominator) | 79,957,649 | 11.82% | ECF 38-3 |
Transaction Tables
All transactions per SAC Table 1 (ECF 38, ¶163). Purchases occurred February 22–March 3, 2022. Sales occurred August 16–17, 2022.
Common Stock Purchases (Feb 22–Mar 3, 2022)
| # | Date | Shares | Price/Share | Cumulative |
|---|---|---|---|---|
| 1 | 02/22 | 75,000 | $14.03 | 75,000 |
| 2 | 02/24 | 367,833 | $15.21 | 442,833 |
| 3 | 02/24 | 500,000 | $13.66 | 942,833 |
| 4 | 02/24 | 500,000 | $14.58 | 1,442,833 |
| 5 | 02/24 | 300,000 | $13.43 | 1,742,833 |
| 6 | 02/25 | 542,621 | $16.22 | 2,285,454 |
| 7 | 02/25 | 115,000 | $16.11 | 2,400,454 |
| 8 | 02/28 | 500,000 | $16.60 | 2,900,454 |
| 9 | 03/01 | 307,341 | $16.94 | 3,207,795 |
| 10 | 03/01 | 311,660 | $16.76 | 3,519,455 |
| 11 | 03/01 | 70,545 | $16.68 | 3,590,000 |
| 12 | 03/02 | 69,516 | $17.25 | 3,659,516 |
| 13 | 03/03 | 20,484 | $16.81 | 3,680,000 |
Total common shares purchased: 3,680,000. Pre-existing position: 5,770,100 shares (9,450,100 total minus 3,680,000 purchased).
Call Option Purchases (Feb 28–Mar 1, 2022)
| # | Date | Strike | Expiry | Underlying Shares | Stock Price |
|---|---|---|---|---|---|
| 14 | 02/28 | $60.00 | Jan 2023 | 475,700 | $16.89 |
| 15 | 02/28 | $75.00 | Jan 2023 | 24,300 | $16.89 |
| 16 | 03/01 | $60.00 | Jan 2023 | 500,000 | $16.67 |
| 17 | 03/01 | $60.00 | Jan 2023 | 150,000 | $16.67 |
| 18 | 03/01 | $75.00 | Jan 2023 | 20,100 | $16.67 |
| 19 | 03/01 | $80.00 | Jan 2023 | 500,000 | $16.67 |
Total call option underlying shares: 1,670,100 ($60 strike: 1,125,700; $75 strike: 44,400; $80 strike: 500,000).
Common Stock Sales — August 16, 2022 (5M-Share Firm Order)
| # | Shares | W.A. Price | Price Range | Remaining |
|---|---|---|---|---|
| S1 | 446,399 | $18.68 | $18.06–$19.05 | 9,003,701 |
| S2 | 812,448 | $19.48 | $19.06–$20.01 | 8,191,253 |
| S3 | 1,443,818 | $20.78 | $20.12–$21.11 | 6,747,435 |
| S4 | 1,059,021 | $21.42 | $21.12–$22.11 | 5,688,414 |
| S5 | 795,559 | $22.71 | $22.13–$23.12 | 4,892,855 |
| S6 | 169,335 | $23.33 | $23.13–$23.84 | 4,723,520 |
| S7 | 103,901 | $24.87 | $24.15–$25.14 | 4,619,619 |
| S8 | 104,077 | $25.59 | $25.15–$26.06 | 4,515,542 |
| S9 | 65,442 | $26.27 | $26.15–$26.45 | 4,450,100 |
Day 1 total: 5,000,000 shares sold across 9 tranches. Remaining: 4,450,100 shares (5.57% of 79,957,649).
Remaining Sales — August 17, 2022
| # | Shares | W.A. Price | Price Range | Remaining |
|---|---|---|---|---|
| S10 | 189,689 | $23.73 | $23.06–$24.05 | 4,260,411 |
| S11 | 512,185 | $24.63 | $24.06–$25.05 | 3,748,226 |
| S12 | 896,238 | $25.50 | $25.06–$26.05 | 2,851,988 |
| S13 | 610,828 | $26.44 | $26.06–$27.05 | 2,241,160 |
| S14 | 323,483 | $27.58 | $27.06–$28.05 | 1,917,677 |
| S15 | 140,788 | $28.51 | $28.06–$29.05 | 1,776,889 |
| S16 | 106,789 | $29.22 | $29.06–$29.99 | 1,670,100 |
Aug 17 common shares sold: 2,780,000. Remaining 1,670,100 shares = call option underlying equivalent.
All 1,670,100 call option shares were also sold August 17 across 5 tranches (16,701 contracts). Contemporaneous stock price used for Rule 16b-6(c)(2) matching: $23.08 (BBBY closing price). After August 17: Cohen held zero shares and zero options.
Profit Calculations
Calculated using lowest-in/highest-out method per Smolowe v. Delendo Corp., 136 F.2d 231 (2d Cir. 1943).
Full Matching (All Transactions)
Plaintiff's calculation matches all purchases (Feb 22–Mar 3) against all sales (Aug 16–17) and relies on a director-by-deputization theory involving Cohen's Board designees. Cohen denies the legal conclusion and calculation. SAC ¶¶169, 181; Answer, ECF 40.
10% Owner Subset Only
Plaintiff's narrower calculation uses only the transactions it alleges occurred while Cohen was above 10% ownership. Cohen denies the legal conclusion and calculation. SAC ¶¶172, 182; Answer, ECF 40.
Admissions Chart
How Cohen responded to each key allegation in the Answer (ECF 40, filed August 12, 2025). Paragraphs 127–172 cover ownership and trade allegations.
| ¶ | Allegation (Summary) | Response |
|---|---|---|
| 127 | Cohen disclosed 9,450,100 shares on March 7, 2022; calculated 9.8% | ADMIT |
| 128 | Percentage assumed denominator of 96,337,713 from Nov 2021 10-Q | ADMIT |
| 129 | Share count was stale; Cohen had reason to know | DENY |
| 130 | Between Nov count and Mar 13D, BBBY buybacks shrank denominator | LACK KNOWLEDGE |
| 131–136 | Board-authorized $1B buyback program details (publicly disclosed) | LACK KNOWLEDGE |
| 137 | November 2 press release attached as Ex. H | ADMIT |
| 138 | Press release disclosed $400M authority through end of FY2021 | DOC SPEAKS |
| 139 | FY2021 ended Feb 26, 2022; reasonable investor on notice | PARTIAL Admit FY end date; deny rest |
| 140 | Jan 6, 2022 investor presentation: ~$275M expected in Q4 | DOC SPEAKS |
| 141–144 | Math showing $400M buyback would reduce count by 15.5M+ shares | LACK KNOWLEDGE |
| 146 | Post-buyback, max ~85.6M outstanding by March 7 | LACK KNOWLEDGE |
| 147 | 9,450,100 shares ÷ ~85.6M = more than 11% | DENY |
| 148 | Virtually assured to own >10% given buyback completion | DENY |
| 149 | Cohen reviewed disclosures, knew of buybacks, mentioned in March 6 letter | PARTIAL Doc speaks + deny |
| 150 | Cohen ignored buyback info in calculating ownership | DENY |
| 151–153 | Apr 21 10-K (79.8M shares); Jun 1 proxy (79.9M); Jun 29 10-Q (79.96M) | DOC SPEAKS |
| 154–155 | Denominator overstated by 20%+; Rule 13d-2(a) required amendment | CONCLUSION → DENY |
| 156 | Did not amend until August 16, 2022 | PARTIAL Admit filing date; doc speaks |
| 157 | Ignored share counts while extracting every other morsel | DENY |
| 158–160 | Exceeded 10% before finishing purchases; remained above until Aug 16 | CONCLUSION → DENY/LACK |
| 162 | Form 4 trades were only transactions reported under Section 16(a) | ADMIT |
| 163 | Table 1 lists all transactions | PARTIAL Admit transactions occurred; deny rest |
| 164 | All trades made over open market (stock + standardized options) | ADMIT |
| 166–172 | Rule 16b-6 calculations; $47.2M profit; $8.4M subset profit | CONCLUSION → DENY |
Notable Pattern: “Lack Knowledge” on Public Facts
Cohen responded "lack knowledge" to ¶¶130–136 and 141–144 — allegations about BBBY's publicly disclosed buyback program. These facts were available in press releases and SEC filings before Cohen began purchasing shares. The "lack knowledge" response to public disclosures may face scrutiny at summary judgment.
Key Affirmative Defenses
Second Defense (Rule 13d-1): Good-faith reliance on the most recent issuer share-count reporting. Fourth Defense (§23(a)): Good-faith conformity with SEC rules. These defenses respond to the stale denominator allegations and argue Cohen reasonably relied on BBBY's last-filed share count.
Public-Docket Status
Reviewed August 12, 2026 against the public RECAP docket. That copy was last updated August 4 and identifies June 30, 2026 as the last known filing; later PACER activity may not be represented.
| Date | Docket Record | What It Establishes | Coverage Note |
|---|---|---|---|
| Feb 20, 2026 | Fact-discovery cutoff (ECF 49) | The January extension moved the stated fact-discovery deadline to February 20. | Elapsed |
| Feb 27, 2026 | Expert-discovery letter (ECF 50) | Defendants filed a letter addressing the expert-discovery schedule. | Filed |
| Mar 2, 2026 | Deposition deadline (ECF 51) | The court granted the application and set a July 24 deposition deadline. | Ordered |
| May 19–22, 2026 | Discovery / motion-to-quash dispute (ECF 52–55) | The docket records a motion to quash, sealing papers, a redacted exhibit, and opposition. | Partly Sealed |
| May 26, 2026 | Kassian deposition extension (ECF 57) | The court adjourned the deposition to a mutually agreeable date between July 1 and July 24. | Ordered |
| Jun 18 & 30, 2026 | Telephone conferences | The public docket records conferences but provides no substantive minute description for June 30. | Recorded |
| After Jun 30, 2026 | Current case posture | No later public filing was available in the reviewed RECAP copy. | Verification Gap |
Source-Coverage Boundary
The January 2026 extension request concerned compliance with a nonparty subpoena, including anticipated JPMorgan production and deposition dates. Later visible docket activity confirms additional discovery and deposition proceedings, but the public copy does not establish the present expert, dispositive-motion, trial, or settlement posture. Review the public docket.