BOSTON, June 13 (Reuters) - A former Miami-based hedge

fund manager was arrested on Friday after federal prosecutors

revived an insider trading case they had been forced to drop in

2022 after a key witness withdrew from an agreement to testify

against him.

Federal prosecutors in Boston said Kris Bortnovsky,

co-founder of Sakal Capital Management, earned over $4 million

by placing illegal trades based on tips he received from among

others a friend whose family held investments and leadership

roles in retailers like DSW owner Designer Brands ( DBI ).

That friend was David Schottenstein, a Florida entrepreneur

who was sentenced to a year in prison in 2023 after admitting to

his role in an insider trading scheme that had led to earlier

charges against Bortnovsky and another man.

Schottenstein had originally agreed to testify against them

but subsequently backed out of his cooperation deal with

authorities. Prosecutors then dropped their case against

Bortnovsky and the other man in December 2022.

Prosecutors reserved the right to bring the case again,

saying their investigation was ongoing, and on Friday revealed

they had obtained guilty pleas from three other individuals in

recent months related to their involvement in the scheme.

Friday's indictment charged Bortnovsky not just with

securities fraud but also obstruction of justice, alleging he

intimidated Schottenstein, identified in the indictment as

"CC-1," in March 2022.

The indictment alleged Bortnovsky while on bail followed

Schottenstein into an orthodox synagogue he attended and, while

wearing dark sunglasses, stared at Schottenstein with the intent

to influence his testimony.

Lawyers for Bortnovsky and Schottenstein did not respond to

requests for comment.

Prosecutors said that from 2017 to 2019, Bortnovsky

conspired with Schottenstein and others to trade on non-public

information regarding the earnings results and

merger-and-acquisition activity of companies including DSW, now

called Designer Brands ( DBI ); Aphria Inc; and Rite Aid.

Prosecutors said Schottenstein passed along information he

learned from a relative on the boards of DSW and Green Growth

Brands, which pursued a failed bid to acquire Aphria. A

Schottenstein family business was involved in a failed merger

involving Rite Aid.

The indictment said Bortnovsky also traded on information he

received from another person about a private equity firm's

potential acquisition of home décor retail chain At Home Group

in 2017 and 2019 and the termination of those deal talks.