The U.S. Securities and Exchange Commission (SEC) has announced charges against three former employees of Arete Wealth Management LLC and its affiliate, Arete Wealth Advisors LLC, for their involvement in a fraudulent scheme that defrauded investors through the sale of unapproved securities. The SEC’s charges also include violations related to recordkeeping, registration, and a cover-up attempt orchestrated by company executives.
The charges stem from a scheme in which Arete representatives, including Joey Miller, Jeff Larson, and Randy Larson, allegedly sold over $8 million in shares of a fraudulent oil-and-gas company, Zona Energy Inc., to their clients. This conduct, known as “selling away,” occurred between October 2018 and May 2020 and was in direct violation of securities laws since Arete Wealth had not approved Zona securities for sale.
List of individuals and entities involved in a securities fraud case. The main defendant, Richard Sterritt (also known as Richman), is 64 years old and resides in Garland, Texas. He was convicted in 2003 for conspiracy to commit securities fraud, money laundering, and filing false tax returns, receiving a five-year prison sentence. Sterritt controls several companies, including public ones like ERFB and ORGH, and private ones like Zona and Richman Energy.
Other individuals named in the case are Greer (45, Dallas), Looney (53, Fort Worth), Magness (51, New York), Mathews (57, Garland), Pittman (49, Dallas), and Ross (53, Miami). They are either friends, employees, or associates of Sterritt, and most are not registered with the Securities and Exchange Commission (SEC). Some, like Ross, had prior issues with the SEC and FINRA.
Relief defendants are individuals who received investor proceeds from Sterritt’s schemes. They include Naomi (25, Los Angeles), Straza (58, Dallas), Touhouliotis (39, Austin), and Rainmaker LLC, a company involved in the fraud. Straza, Sterritt’s ex-wife, had previously been found guilty in a similar conspiracy case.
The SEC claims that the three defendants used personal communication channels such as private phones and emails to hide their illegal activities from Arete management. Miller and Jeff Larson are accused of making misleading statements to potential investors to secure the sale of the shares, with the company’s founder, Richard Dale Sterritt, Jr., selling deeply discounted Zona shares in return for the representatives’ efforts.
The charges also allege that after Arete learned about the fraud, company management, led by Chief Compliance Officer Bob Chung, instructed the three former employees to obtain settlement agreements from clients. These agreements, signed by more than 100 affected clients, contained false and misleading statements, including an illegal disclaimer that improperly led investors to believe they had waived their right to pursue legal action against the company.
The Zona Offering Fraud involves Sterritt and his associates using false and misleading representations to raise money from investors. Zona, a company controlled by Sterritt, acquired mineral rights on the La Escalera Ranch in West Texas in 2018, incurring significant debt through demand notes. Starting in April 2018, Sterritt and others began selling Zona shares, falsely promoting the mineral rights as a low-risk investment. They used fraudulent materials, misrepresenting Zona’s management and financial situation, and made false claims about the drilling project’s profitability.
“As alleged in this case, after Arete’s personnel defrauded investors, Arete, as aided by Chung, compounded the harm to these investors by having them sign releases that were false and misleading,” said Sam Waldon, Acting Deputy Director of the SEC’s Division of Enforcement. “Today’s action is a reminder to gatekeepers that if you find potential evidence of misconduct and take steps to cover it up, you may expose yourself to liability.”
Alongside these charges, the SEC also settled charges against Michael Sealy, who was accused of acting as an unregistered broker-dealer in connection with selling Zona shares. Sealy has agreed to pay a civil penalty of $200,000 and is barred from participating in penny stock offerings for 12 months.
The offering was unregistered and no exemption applied. Despite claiming the funds gathered would support the Ranch’s drilling program, much of the money was misappropriated. Sterritt and his associates allegedly transferred funds between Sterritt-controlled accounts and used the money for personal expenses, including luxury goods, and to pay earlier investors in a Ponzi-like fashion. The fraudulent activities raised over $16 million from 300+ investors.
In addition, Sterritt manipulated the stock of another company, ORGH, by using Zona shares to gain control of ORGH and engaging in a “pump and dump” scheme to artificially inflate ORGH’s stock price. Sterritt and his associates executed matched trades to deceive the market and profit from the stock’s price manipulation.
The SEC’s complaint seeks permanent injunctions, civil penalties, and bars against the defendants, including officer-and-director and penny stock bars. The commission’s investigation, which was led by SEC officials in New York, highlights the critical importance of transparency and compliance within the financial industry.
The case underscores the SEC’s continued commitment to holding individuals and companies accountable for fraudulent practices that harm investors and undermine the integrity of the securities market. It also serves as a warning to industry professionals that covering up misconduct can lead to severe legal consequences.
The SEC’s investigation 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).
