The Securities and Exchange Commission announced fraud charges against Phoenix-based real estate investment company ArciTerra Companies LLC and its chief executive officer, Jonathan M. Larmore, for engaging in a multi-year scheme to misappropriate millions of dollars of investor funds from investment vehicles that ArciTerra managed. The SEC also charged several entities controlled by Larmore for their roles in the scheme.
The SEC’s complaint alleges that, since at least January 2017, Larmore and the entities he controls misappropriated more than $35 million from private real estate funds and other investment vehicles that ArciTerra managed. Among the many inappropriate diversions of cash to Larmore’s personal use were transfers made to pay for his wife’s (relief defendant Michelle Larmore) and his children’s personal credit card bills. The SEC says Larmore essentially treated one of the entities as his “own personal bank account” to fund his lavish lifestyle of private jets, yachts, high-end cars, and expensive residences.
The SEC’s complaint also alleges that Larmore and Cole Capital Funds LLC, an entity Larmore formed and controlled, issued a press release in November 2023 falsely stating that Cole Capital intended to purchase 51% of all minority ownership shares in WeWork Inc. at $9 a share, more than nine times WeWork’s then-current trading price. According to the SEC’s complaint, WeWork’s stock rose close to 150% in after-hours trading shortly after the press release was issued. The complaint alleges that Larmore purchased more than 72,000 call options in WeWork at a price far below the stock price in the days before the press release was published, hoping to execute the trades at profit after manipulating the stock price. However, due to a delay in the issuance of the press release, most of the options expired before Larmore could exercise them.
“As the complaint alleges, instead of protecting client assets, Larmore and his related entities took advantage of investor trust for his and his family’s personal gain,” said Andrew Dean, co-chief of the asset management unit. “Protecting investors from fraud by their financial advisers is a priority for the SEC, as is protecting the market from false press releases aimed at manipulating the stock of a publicly traded company for personal gain and leaving unknowing investors to lose out.”
The SEC’s complaint, filed in U.S. District Court for District of Arizona, charged Larmore, ArciTerra, and several related entities controlled by Larmore with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, the appointment of a receiver, disgorgement and prejudgment interest, and a civil penalty and other relief.