A firm can be financed with debt or equity. Issuing bonds to buy back stock is simply changing the structure of how the firm is financed. It does not have a moral component.
This doesn’t apply to the BBBY case, but back when long-term corporate bonds could be sold at ~2%, it made a ton of sense to issue low rate bonds to buy back stock. Apple made a killing on this play in 2013-2017, then again in 2021: https://www.macrotrends.net/stocks/charts/AAPL/apple/debt-is...
Raising money by issuing stock for the purpose of modernizing a company is one thing, as an investor I'd be happy to buy such stock.
But I would not buy stock only for the company to do buy-back programs for other shareholders, especially not if the company would be in a worse shape (i.e. less net worth of its assets and debts) afterwards.
You can't finance a stock buy back with more stock.
A firm has assets and operations and those are funded with either debt or equity. Borrowing money to buy back stock is simply changing the capital structure of the firm.
For BBB the fraud is that the execs knew it was failing, used the debt to cash out. Maybe they lied to retail-investors but typically one has to tell the financier what the debt is for and then not doing that is a contract breach which could be labeled fraud.
They lied to no one. I don't believe anyone has questioned the financials.
I find it amusing that everyone has sympathy for the the shareholders (who were given an opportunity to get out), while no one seems to feel a bit of sympathy for the bond holders. If anyone was defrauded (and personally I don't believe anyone was) it was them.
Where is the fraud?