SEC Charges Arete Reps with Broker Fraud Involving Zona Energy Inc.
The SEC has reportedly charged Arete Wealth Management LLC, its affiliate Arete Wealth Advisors LLC, and several representatives with fraud involving sham oil and gas company Zona Energy Inc.
The Arete reps, Joey Miller, Jeff Larson, and Randy Larson, were reportedly charged with fraud, registration violations, and record keeping breaches.
The charges involve the unapproved sale of more than $8 million in shares of Zona Energy Inc., oil-and-gas company, between 2018 and 2020. The accused reportedly used unauthorized communication channels to conceal their actions and allegedly misled investors with false statements, reportedly receiving discounted Zona shares in return.
Arete’s chief compliance officer and general counsel, is accused of aiding compliance violations by orchestrating misleading settlement agreements with over 100 investors to waive legal claims.
Another seller, Michael Sealy, reportedly settled with the SEC, agreeing to penalties and a temporary ban from penny stock offerings.
The SEC seeks various penalties, including permanent injunctions, bars on certain roles, and fines. The investigation was supported by FINRA, the FBI, and federal prosecutors, with litigation ongoing in the Northern District of Illinois.
What is Zona Energy Inc.?
Zona Energy Inc. is an oil and natural gas company based in Dallas, Texas, focused on the Permian Basin. The company was reportedly centered on the acquisition, development, exploration, and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. The company reportedly began operations in April 2018 with the acquisition of various oil and gas working interests in 3,915 net acres in the Delaware Basin of the Permian Basin in Pecos County, Texas.
Zona Energy Inc.: Fraud Scheme
Between March 2018 and November 2020, Zona Energy executives, including its CEO, were allegedly implicated in a fraudulent scheme, according to the SEC. They allegedly raised over $16 million from more than 300 investors through an unregistered private placement of Zona Energy’s common stock.
The company allegedly falsely claimed the funds would develop mineral rights on a West Texas cattle ranch. Instead, a significant portion of the investments was misappropriated for personal luxuries, such as luxury cars and rental apartments.
In April 2021, the SEC reportedly charged the CEO and six associates with defrauding investors in connection with this scheme. Subsequently, in January 2023, the company’s CEO reportedly pleaded guilty to securities fraud charges related to the Zona Energy scam.
“Selling Away”
When a registered representative or investment advisor conducts business outside the scope of the brokerage firm where they are registered, the act can be considered “selling away.” Some brokers, looking to supplement their income, will go outside the traditional market, trying to find other products to push.
If a registered broker “sells away” from their firm, the brokerage firm may still be liable for negligent supervision of their broker representative and may be responsible for investment losses in a FINRA dispute resolution claim.
Free Consultation with Securities Fraud Attorneys
If you have suffered losses investing in Zona Energy Inc., we may be able to help you. Please contact the securities attorneys at The White Law Group. For a free consultation, please call the offices at 888-637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.
We represent investors in FINRA arbitration claims in all 50 states. Our attorneys have recovered millions of dollars from many brokerage firms in the past.
The Financial Industry Regulatory Authority (FINRA) operates the largest securities dispute resolution forum in the United States, and has extensive experience in providing a fair, efficient and effective venue to handle a securities-related dispute.
Last modified: January 22, 2025
