The executive behind a fake tender offer for failing co-working company WeWork Inc. has been sentenced to prison in the U.S. after being convicted of securities fraud.
Last fall, following a one-week trial, Jonathan Larmore, the former CEO of a real estate investment and management firm, ArciTerra Companies LLC, was convicted of one count of securities fraud and one count of tender offer fraud in connection with a scheme that was carried out in late 2023. The scheme involved a purported offer for a controlling stake in WeWork, which was on the verge of bankruptcy at the time.
On Tuesday, a U.S. district court judge sentenced Larmore to five years in prison, with three years of supervised release, and 500 hours of community service.
According to U.S. authorities, in 2023, Larmore acquired hundreds of thousands shares and tens of thousands of options in WeWork. The executive sought to boost the value of these holdings by falsely signalling a possible takeover of the company at a healthy premium.
To carry out the scheme, Larmore created a real estate investment firm, Cole Capital Funds LLC, that issued a press release containing false and misleading claims about its ability to execute the proposed transaction.
“In fact, neither Larmore nor Cole Capital had the intent or ability to execute the announced tender offer. Instead, Larmore intended for news of the tender offer to fraudulently inflate WeWork’s share price and, thereby, to increase the value of Larmore’s newly acquired WeWork call options and shares,” the U.S. attorney’s office for the Southern District of New York said, in a release.
“Jonathan Larmore treated the stock market like a game he could rig to obtain instant riches at the expense of innocent investors,” said Matthew Podolsky, acting U.S. attorney for the SDNY, in a release accompanying the sentencing announcement.
In a parallel civil action in 2023, the U.S. Securities and Exchange Commission (SEC) also charged Larmore, ArciTerra, and several related companies for allegedly misappropriating over US$35 million from various investment funds in addition to the tender offer scheme.
The ArciTerra companies remain subject to an ongoing receivership proceeding in Arizona.