Real Estate Investor Arrested For $77M WeWork Stock Offer Ploy

An investor who allegedly tried to manipulate WeWork’s stock price is facing criminal charges.

The founder of Arizona-based real estate firm Arciterra Cos., Jonathan Larmore, has been charged with tender offer fraud and securities fraud after setting up a shell company to buy expiring WeWork stock in a bid to take over the company, according to a release from the U.S. Attorney’s Office for the Southern District of New York.

Larmore was taken into custody on Thursday morning and was scheduled to appear in court in Fort Myers in the afternoon, Bloomberg Law reported. The charges carry a maximum sentence of 20 years in prison.

Larmore executed a plan in three steps, prosecutors say, as WeWork was circling the drain toward an inevitable bankruptcy. 

First, in October, he set up a real estate investment firm, Cole Capital Funds, that the U.S. Attorney’s Office describes as “merely a sham company.” He then allegedly bought “tens of thousands of cheap, short-dated, out-of-the-money WeWork call options” with an expiration date of Nov. 3 for roughly $775K.

A press release announcing Cole Capital’s proposal to acquire 51% of outstanding shares from WeWork’s minority shareholders in an all-cash, $77M offer was published that same day, the week before WeWork went bankrupt, at more than 7 times the stock price.

Investors began to buy WeWork stock at inflated prices in after-hours trading following Cole Capital’s announcement of the false takeover offer, Bloomberg reported. 

The indictment was unsealed Thursday, but Larmore and Cole Capital Funds have been under scrutiny since shortly after the press release was filed. Regulators from the Securities and Exchange Commission sent inquiries to Larmore over the failed bid for WeWork shares in mid-November

A lawyer for Larmore, Seth Waxman, told Bloomberg that Larmore was going to challenge the SEC’s case and that he plans to “vigorously contest and exonerate himself in both matters.”

Neither Larmore nor Cole Capital Funds immediately responded to Bisnow’s request for comment. WeWork declined to comment.

Larmore’s Arciterra Cos. has also come under scrutiny from regulators in the past, per Bloomberg. 

Investors filed a lawsuit against Arciterra last May, alleging that the company was neglecting its real estate while Larmore was using investor funds to pay for a party for his dog, an 87-foot yacht and a private jet.

The lawsuit was later withdrawn, although lenders have also reportedly sought foreclosures on Arciterra properties. The SEC also appointed a receiver to oversee Arciterra and its affiliates in December, following the allegations that Larmore had misused funds.