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Introduction

The U.S. Securities and Exchange Commission (SEC) is still
pursuing accounting fraud. Despite the reduction in staffing in
2025 and the accompanying sinking morale, the SEC enforcement staff
continues to investigate and charge these types of cases. Also
— and importantly aligned with statements from Chair Paul S.
Atkins — filing charges against individuals in such
matters.1

Last month, the SEC filed a detailed, 63-page complaint in the
U.S. District Court for the District of Arizona against three
former senior executives of AMMO, Inc. (now renamed Outdoor Holding
Company), alleging a years-long scheme to mislead investors,
conceal the role of a banned executive, and falsify corporate
records. See SEC v. Wagenhals, Wiley, and Larson,
Case No. 2:25-cv-04696.

The SEC accuses all three former executives of violating key
antifraud rules under the Securities Act of 1933 and the Securities
Exchange Act of 1934. It further alleges that two of the
executives, Fred W. Wagenhals and Robert D. Wiley, falsified
corporate books and records, misled auditors, submitted false
certification statements, and failed to return compensation as
required after AMMO’s financial restatement under
Section 304(a) of the Sarbanes-Oxley Act. The SEC is seeking
sweeping remedies, including permanent injunctions, civil
penalties, officer-and-director bans, disgorgement of gains from
co-founder and vice president of finance at AMMO, Christopher D.
Larson, with interest, and compensation reimbursement from
Wagenhals and Wiley.

Concealing a Barred Executive’s Role

At the center of the case is the SEC’s contention that
Larson acted as a de facto senior executive from 2017 to 2022,
despite a federal court judgment in 2020 prohibiting him from
serving as an officer or director of any public company for five
years. The SEC also alleges that the other co-defendants, Wagenhals
as CEO and Wiley as CFO, knowingly concealed Larson’s true role
from shareholders, auditors, and regulators.

According to the complaint, Larson was not only involved in
AMMO’s day‑to‑day management but led negotiations
for its $240 million acquisition of GunBroker.com, oversaw capital
raises, approved vendor contracts, and participated directly in the
company’s investor relations strategy. Despite this
high‑level involvement, AMMO’s SEC filings from 2020
through 2023 consistently omitted Larson from the list of executive
officers and claimed that no officer had been subject to recent
disciplinary action — statements the SEC says were materially
false.

For example, the SEC alleges that Wagenhals and Wiley misled two
separate outside audit firms about Larson’s employment status,
going so far as to backdate a “separation agreement” to
suggest Larson had left the company, while internal emails show him
actively participating in corporate transactions.

Undisclosed Related‑Party Deals

In addition, the complaint details several transactions
benefiting Larson or his immediate family that were never properly
disclosed as “related party” arrangements, as required by
SEC Regulation S‑K Item 404 and by Generally Accepted
Accounting Principles (GAAP). For example:


Hiring Larson’s brother’s construction company to build
a new $25 million manufacturing facility without competitive bids
or board approval, resulting in payments of more than $25 million
over two fiscal years.

Arranging a “kickback” deal where an AMMO payment
processor shared roughly $814,000 of its fees with Larson’s own
consulting firm.

None of these transactions were disclosed in AMMO’s annual
reports at the time, although they later appeared in a 2025
restatement after a special committee investigation.

Manipulating the Numbers

Beyond the concealment allegations, the SEC charges Wiley and
Larson with distorting AMMO’s reported financials.

For example, in one instance, when internal calculations showed
negative “Adjusted EBITDA” for the quarter ending
September 30, 2020, Wiley changed the methodology to add back
excise taxes — flipping the result to a positive $976,521
— and approved a press release touting “our first ever
quarter of adjusted EBITDA profitability,” without disclosing
the change in calculation.

Separately, Larson is accused of falsely characterizing investor
relations spending as costs attributable to securities offerings so
the amounts could be capitalized rather than expensed. This
allegedly reduced operating expenses by millions and inflated net
income in FY 2022 by more than 17%.

Takeaways

The case highlights several legal risks for public company
executives. First, the SEC treats “executive officer”
status as a matter of substance, not title — if someone is
performing policy‑making functions, they must be disclosed,
along with their compensation and any disciplinary history. Second,
related‑party transactions involving family members or
controlled entities require full disclosure and clear accounting
treatment. Third, non‑GAAP metrics like Adjusted EBITDA must
be calculated consistently, or changes must be explained to
investors.

Perhaps most seriously for CEOs and CFOs, the
Sarbanes‑Oxley Act’s §304 allows for clawbacks of
incentive pay and stock‑sale profits in the year following a
materially noncompliant filing that is later restated due to
misconduct. The SEC seeks such clawbacks from Wagenhals and
Wiley.

For public companies and their leadership, this case is a
reminder that disclosure controls, transparent governance, and
auditor candor are not merely best practices — they are legal
obligations. Where executives obscure material facts, particularly
about control, related-party dealings, or financial results, the
SEC can and will aggressively investigate and bring charges —
and against individuals.

Footnote

1. The SEC did also charge the company via a settled
administrative proceeding. See
https://www.sec.gov/files/litigation/admin/2025/33-11397.pdf

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