Washington D.C., Nov. 29, 2023 — The Securities and Exchange Commission (SEC) recently filed charges against ArciTerra Companies LLC, a Phoenix-based real estate investment firm, and its CEO, Jonathan M. Larmore. The allegations surround a complex, multi-year scheme to misappropriate over $35 million from investor funds managed by ArciTerra. Additionally, Larmore faces charges of stock manipulation related to a false WeWork tender offer.
Unraveling the Scheme: Misappropriation of Investor Funds
The SEC’s complaint, filed on November 28, 2023, alleges a scheme dating back to at least January 2017. Larmore and entities under his control diverted funds from private real estate funds and other investment vehicles managed by ArciTerra. The misappropriated millions were purportedly used to finance a lavish lifestyle, including private jets, yachts, and opulent residences. A significant portion was also allocated to cover personal expenses for Larmore’s family members.
False WeWork Tender Offer and Stock Manipulation
The SEC accuses Larmore and Cole Capital Funds LLC, an entity he founded and controlled, of issuing a misleading press release in November 2023. The release claimed that Cole Capital intended to acquire 51 percent of all minority ownership shares in WeWork, Inc. The offered price of $9 per share was over nine times WeWork’s then-current trading value. Consequently, WeWork’s stock surged nearly 150 percent in after-hours trading following the press release.
The SEC contends that Larmore strategically purchased more than 72,000 call options in WeWork, anticipating a profitable outcome by manipulating the stock price. Unfortunately for Larmore, a delay in the press release issuance led to the expiration of most options before he could exercise them.
SEC’s Reaction and Legal Action
Andrew Dean, Co-Chief of the Asset Management Unit, emphasized the SEC’s commitment to protecting investors from fraudulent financial advisers. He stated, “Instead of protecting client assets, Larmore and his related entities took advantage of investor trust for his and his family’s personal gain.”
The SEC’s complaint, filed in the U.S. District Court for the District of Arizona, charges Larmore, ArciTerra, and affiliated entities with violating federal securities laws’ antifraud provisions. Seeking permanent injunctive relief, the appointment of a receiver, disgorgement with prejudgment interest, civil penalties, and additional relief, the SEC aims to hold those involved accountable.