Arete Wealth Faces Charges Over Alleged Fraud Scheme

The Securities and Exchange Commission (SEC) has initiated legal proceedings against Arete Wealth Management LLC, its affiliate Arete Wealth Advisors LLC, and several associated individuals.

According to the SEC, Joey Miller, Jeff Larson, and Randy Larson—former representatives of Arete—engaged in unauthorised sales of securities linked to Zona Energy Inc., described as a fraudulent oil-and-gas company. From October 2018 to May 2020, the trio allegedly sold over $8 million worth of Zona shares to investors without obtaining the required approval from their firm. It is further alleged that they used personal communication devices and email accounts to avoid detection, misleading investors with false information about the securities' legitimacy and value. In return, they reportedly received significant discounts on Zona shares.

UnBo (Bob) Chung, Aretes chief compliance officer and general counsel, is also named in the charges. The SEC alleges that Chung, alongside other executives, instructed Miller and the Larsons to secure settlement agreements from more than 100 clients who had invested in Zona. These agreements reportedly contained misleading statements and unlawful disclaimers, deceiving investors into waiving their rights to take legal action against the firm. The SEC contends that these actions amplified the harm caused to the affected clients.

Another participant, Michael Sealy, who was involved in selling Zona shares, has reached a settlement with the SEC. While not admitting or denying the charges, Sealy has agreed to pay a $200,000 civil penalty, accept a 12-month suspension from penny stock offerings, and refrain from further violations.

Filed in the U.S. District Court for the Northern District of Illinois, the SECs complaint seeks multiple remedies. These include permanent injunctions, bans on certain conduct, officer-and-director prohibitions, restrictions on penny stock activities, and financial penalties. The SEC has accused Arete Wealth Advisors of breaching antifraud and compliance regulations under the Investment Advisers Act of 1940. Arete Wealth Management is also facing allegations of recordkeeping violations under the Securities Exchange Act of 1934.

The investigation, led by the SEC‘s New York Regional Office, received assistance from the U.S. Attorney’s Office for the Eastern District of New York, the FBI, and the Financial Industry Regulatory Authority (FINRA). The SECs Division of Enforcement will oversee the ongoing litigation.