A strip mall mogul accused of running a botched scheme to manipulate the price of WeWork shares was arrested on fraud charges over what prosecutors called a phony $77 million tender offer.
Jonathan M. Larmore, of Punta Gorda, Florida, was taken into custody Thursday morning and was scheduled to appear before a magistrate judge in Fort Myers in the afternoon. He announced the fake offer late last year, shortly before the co-working company filed for bankruptcy, to manipulate its stock price, according to a statement by Manhattan US Attorney Damian Williams.
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News of the offer led investors to buy WeWork stock at inflated prices during after-hours trading, as Larmore tried to drive up the value of his WeWork call options and shares, according to the US. But he mistimed his announcement of the false offer, prosecutors say, and his options were worthless.
The case is the latest example of criminal charges over alleged attempts to manipulate stock through fake tender offers, which can spike the shares and bring traders a fast profit. In 2018 a Virginia man was sentenced to two years in prison for a scheme to manipulate securities of Fitbit. In 2016 a Bulgarian man was arrested and charged on US claims that he used fake tender offers to rig the market for Rocky Mountain Chocolate Factory and Avon Products.
Scrutiny of Larmore
Larmore’s activities have faced greater scrutiny in recent months, with regulators, banks and vendors targeting his real estate firm, Arciterra, whose holdings were valued at $570 million last year. The US Securities and Exchange Commission has sued him over the alleged manipulation scam and over claims that he used investor funds to pay for a lavish lifestyle, while lenders have sought to foreclose on Arciterra properties.
An investor lawsuit filed last May accused him of neglecting the upkeep of Arciterra real estate, even as he used investor capital to pay for a private jet, an 87-foot yacht and a blow-out party for his Boston Terrier, Spike.
That lawsuit has been withdrawn, and Larmore, 51, has called the allegations baseless.
He recently challenged the regulator’s case and was “going to put the SEC to the test of offering real evidence,” his lawyer, Seth Waxman, said on Thursday.
“When the SEC was on the precipice of having to put that evidence on, suddenly the US Attorney’s office in SDNY issues this indictment,” Waxman said, referring to federal prosecutors in the Southern District of New York. He said that showed “the weakness in the SEC’s case” and that his client “intends to vigorously contest and exonerate himself in both matters.”
Botched scheme
In the criminal case, Larmore is charged with tender offer fraud and securities fraud, which both carry a sentence as long as 20 years in prison if he is convicted, though federal guidelines often result in shorter terms than the maximum.
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Prosecutors claim he created a sham real estate company called Cole Capital Funds LLC in early October. They say he then spent more than $775,000 buying tens of thousands of call options on Nov. 1 and 2 — most of which were set to expire the following day — as well as hundreds of thousands of shares of WeWork stock. Call options confer the right to buy an asset at a set price by a particular date.
On Nov. 3, Larmore had a press release published announcing that Cole had offered to buy 51% of all outstanding stock owned by WeWork minority shareholders for $77 million in cash, a premium of more than 700%, according to the government. Prosecutors say he had no intention of executing the offer and only wanted to pump his shares higher.
When the press release was published, after the market closed, WeWork’s share price jumped more than 70%, according to the US. But because Larmore had mistimed the release, the vast majority of his options had expired about an hour earlier.
WeWork filed for bankruptcy protection the following Monday.
The case is US v. Larmore, 24-mj-01038, US District Court, Middle District of Florida (Fort Myers).
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