Recently, the Securities and Exchange Commission brought fraud charges against Jonathan Larmore for allegedly looting $35 million from real estate funds he advised. Larmore is a real estate investor, an investment adviser, and CEO of ArciTerra Companies LLC.[1][2] The complaint alleges that they used the proceeds to pay personal expenses, including credit card bills, and to fund a “lavish lifestyle of private jets, yachts, and expensive residences.” The complaint alleges violations of the antifraud provisions of the Investment Advisers Act of 1940 and the Securities Exchange Act of 1934.
The SEC also alleges that Larmore manipulated the stock of WeWork. According to the complaint, Larmore created Cole Capital Funds LLC in October 2023. Then, he issued a press release falsely stating that Cole Capital intended to purchase WeWork Inc. at $9 a share in a purported tender offer. That price was almost nine times WeWork’s trading price at that time. The complaint alleges that Larmore has neither the intent nor the ability to fund the tender offer. But the bogus press release has the intended effect of increasing WeWork’s stock price—it skyrocketed nearly 150 percent in after-hours trading shortly after the press release was issued.
Larmore was unable to profit from the alleged manipulation. Just before issuing the press release, Larmore had purchased a total of 72,846 out-of-the-money call option contracts on WeWork’s common stock. Larmore stood to gain hundreds of thousands, if not millions, of dollars from exercising the options. But, due to a delay in the press release being issued, most of the stock options that Larmore possessed expired before WeWork’s stock prices spiked, rendering him unable to profit. Nonetheless, because of the phony tender offer, the SEC also charged him with violations of Section 14(e) of the Exchange Act and Exchange Act Rule 14e-1.
The SEC is seeking disgorgement of ill-gotten gains, civil penalties, injunctive relief, and the appointment of a receiver.
[1] Sec. and Exch. Comm’n v. Larmore, et al., 2:23-cv-02470-DWL (D. Ariz. Nov. 28, 2023).
[2] https://www.sec.gov/news/press-release/2023-242