The Securities and Exchange Commission (SEC) on Wednesday announced fraud charges against a Phoenix-based real estate fund adviser for allegedly misappropriating millions of dollars of investor funds over several years.
In a complaint filed in Arizona on Nov. 28, the SEC accused ArciTerra Companies LLC CEO Jonathan Larmore of misappropriating over $35 million from private real estate funds and other investment vehicles that the firm managed since at least January 2017. A substantial portion of the funds were allegedly used to fund Larmore's lavish lifestyle.
In addition, the SEC also charged Larmore and Cole Capital Funds LLC, an entity he formed and controlled, for making a false offer to buy 51% of minority shares from WeWork at a large premium earlier this month, just days before the coworking company filed Chapter 11 bankruptcy.
The SEC said WeWork shares rose about 150% in after-hours trading after Larmore announced plans to purchase the shares.
"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," Andrew Dean, Co-Chief of the Asset Management Unit, said in the complaint. "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."
May Lawsuit Against Larmore
In May, a group of investors filed a federal lawsuit against Larmore. In that suit, first reported by Bloomberg, investors accused Larmore, his wife, and his mother of owning 12 houses throughout the country, two of which recently underwent expensive renovations. The trio is also said to own a Cessna Citation jet, a Gulfstream G400, a $250,000 wake surf boat, and a $2.5 million motor yacht.
"They frequently throw lavish parties costing six figures. In the summer of 2022, they threw such a six-figure party, flying in friends and family on their private aircraft. One such party was to celebrate the birthday of their Boston Terrier, Spike," the investors said in the lawsuit.
That lawsuit also accused Larmore of failing to pay dividends to the company's more than 2,000 investors, adding that some have not received their money since 2011. They claimed Larmore could be attempting to "wait out" its elderly investors to skip paying the money they are owed.
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