Unveiling the Complexity of a Major Fraud Allegation
In January of 2025, the U.S Securities and Exchange Commission (SEC) turned the spotlight on a complex case of deceit involving investment professionals Joey Miller and Jeffrey Larson. The nature of these allegations is incredibly serious and it’s essential for investors to understand the context and implications.
This pair were charged with fraud, registration violations, and aiding and abetting Arete Wealth Management’s recordkeeping violations, among others. These charges stem from their participation in a scheme to defraud investors through a sham oil-and-gas company, Zona Energy Inc.
Their conniving plan allegedly involved the sale of over $8 million worth of Zona shares to many of their Arete clients and customers, in what is known as “selling away”—a practice prohibited by securities laws. The SEC’s complaint further alleges the use of personal communication channels to evade Arete surveillance.
A Background Check on the Fraud Allegations
Peering into the background of the two financial advisors in question, Joey Miller and Jeffrey Larson, throws more light on their previous engagements.
Joey Miller entered the securities industry in 2013, with Arete Wealth Management, LLC, and Arete Wealth Advisors, LLC being part of his former employers. On the other hand, Jeffrey Larson started his securities career in 2004 and had an even longer association with the mentioned entities.
One of the main contentions of the SEC’s investigation is that despite Arete not approving Zona securities for offer and sale, Miller and Larson went ahead to raise over $5 million for Zona. As compensation, they were reportedly given deeply discounted Zona shares.
Understanding the FINRA Rule Violation
According to the guidelines established by the Financial Industry Regulatory Authority (FINRA), financial advisors are explicitly prohibited from “selling away.” The term refers to selling securities not offered by the broker’s employer.
A sobering financial fact to digest is that about “44% of brokers with a misconduct report are repeat offenders.” Selling away poses a high risk for fraud, which underscores why FINRA stringently requires advisors to disclose outside business activities and transactions.
The Aftermath and Learning Points
The case against Miller and Larson reverberates with the wise words of Warren Buffett who once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
As a direct aftermath of the SEC investigation, severe penalties and injunctions are being sought against all involved. This includes Miller and Larson who may face conduct-based injunctions, penny stock bars, and officer and director bars.
The case brings to light the critical importance of being vigilant as an investor. Advisors should operate within the limits set by governing bodies and breach of such rules creates a red flag to investors. The unfortunate Zona incident reinforces the necessity of thorough due diligence before making investment decisions, not solely based on advisors’ recommendations.
The bottom line? Investment entails calculated risk-taking, but one risk you should never take is sidelining due diligence.