See SEC v. Wagenhals, Wiley, and Larson,
\nCase No. 2:25-cv-04696.<\/a><\/p>\nThe SEC accuses all three former executives of violating key
\nantifraud rules under the Securities Act of 1933 and the Securities
\nExchange Act of 1934. It further alleges that two of the
\nexecutives, Fred W. Wagenhals and Robert D. Wiley, falsified
\ncorporate books and records, misled auditors, submitted false
\ncertification statements, and failed to return compensation as
\nrequired after AMMO’s financial restatement under
\nSection\u202f304(a) of the Sarbanes-Oxley Act. The SEC is seeking
\nsweeping remedies, including permanent injunctions, civil
\npenalties, officer-and-director bans, disgorgement of gains from
\nco-founder and vice president of finance at AMMO, Christopher D.
\nLarson, with interest, and compensation reimbursement from
\nWagenhals and Wiley.<\/p>\n
Concealing a Barred Executive’s Role<\/p>\n
At the center of the case is the SEC’s contention that
\nLarson acted as a de facto senior executive from 2017 to 2022,
\ndespite a federal court judgment in 2020 prohibiting him from
\nserving as an officer or director of any public company for five
\nyears. The SEC also alleges that the other co-defendants, Wagenhals
\nas CEO and Wiley as CFO, knowingly concealed Larson’s true role
\nfrom shareholders, auditors, and regulators.<\/p>\n
According to the complaint, Larson was not only involved in
\nAMMO’s day\u2011to\u2011day management but led negotiations
\nfor its $240 million acquisition of GunBroker.com, oversaw capital
\nraises, approved vendor contracts, and participated directly in the
\ncompany’s investor relations strategy. Despite this
\nhigh\u2011level involvement, AMMO’s SEC filings from 2020
\nthrough 2023 consistently omitted Larson from the list of executive
\nofficers and claimed that no officer had been subject to recent
\ndisciplinary action \u2014 statements the SEC says were materially
\nfalse.<\/p>\n
For example, the SEC alleges that Wagenhals and Wiley misled two
\nseparate outside audit firms about Larson’s employment status,
\ngoing so far as to backdate a “separation agreement” to
\nsuggest Larson had left the company, while internal emails show him
\nactively participating in corporate transactions.<\/p>\n
Undisclosed Related\u2011Party Deals<\/p>\n
In addition, the complaint details several transactions
\nbenefiting Larson or his immediate family that were never properly
\ndisclosed as “related party” arrangements, as required by
\nSEC Regulation S\u2011K Item 404 and by Generally Accepted
\nAccounting Principles (GAAP). For example:<\/p>\n
\nHiring Larson’s brother’s construction company to build
\na new $25 million manufacturing facility without competitive bids
\nor board approval, resulting in payments of more than $25 million
\nover two fiscal years.
\n
\nArranging a “kickback” deal where an AMMO payment
\nprocessor shared roughly $814,000 of its fees with Larson’s own
\nconsulting firm.
<\/p>\n
None of these transactions were disclosed in AMMO’s annual
\nreports at the time, although they later appeared in a 2025
\nrestatement after a special committee investigation.<\/p>\n
Manipulating the Numbers<\/p>\n
Beyond the concealment allegations, the SEC charges Wiley and
\nLarson with distorting AMMO’s reported financials.<\/p>\n
For example, in one instance, when internal calculations showed
\nnegative “Adjusted EBITDA” for the quarter ending
\nSeptember 30, 2020, Wiley changed the methodology to add back
\nexcise taxes \u2014 flipping the result to a positive $976,521
\n\u2014 and approved a press release touting “our first ever
\nquarter of adjusted EBITDA profitability,” without disclosing
\nthe change in calculation.<\/p>\n
Separately, Larson is accused of falsely characterizing investor
\nrelations spending as costs attributable to securities offerings so
\nthe amounts could be capitalized rather than expensed. This
\nallegedly reduced operating expenses by millions and inflated net
\nincome in FY 2022 by more than 17%.<\/p>\n
Takeaways<\/p>\n
The case highlights several legal risks for public company
\nexecutives. First, the SEC treats “executive officer”
\nstatus as a matter of substance, not title \u2014 if someone is
\nperforming policy\u2011making functions, they must be disclosed,
\nalong with their compensation and any disciplinary history. Second,
\nrelated\u2011party transactions involving family members or
\ncontrolled entities require full disclosure and clear accounting
\ntreatment. Third, non\u2011GAAP metrics like Adjusted EBITDA must
\nbe calculated consistently, or changes must be explained to
\ninvestors.<\/p>\n
Perhaps most seriously for CEOs and CFOs, the
\nSarbanes\u2011Oxley Act’s \u00a7304 allows for clawbacks of
\nincentive pay and stock\u2011sale profits in the year following a
\nmaterially noncompliant filing that is later restated due to
\nmisconduct. The SEC seeks such clawbacks from Wagenhals and
\nWiley.<\/p>\n
For public companies and their leadership, this case is a
\nreminder that disclosure controls, transparent governance, and
\nauditor candor are not merely best practices \u2014 they are legal
\nobligations. Where executives obscure material facts, particularly
\nabout control, related-party dealings, or financial results, the
\nSEC can and will aggressively investigate and bring charges \u2014
\nand against individuals.<\/p>\n
Footnote<\/p>\n
1. The SEC did also charge the company via a settled
\nadministrative proceeding. See
\nhttps:\/\/www.sec.gov\/files\/litigation\/admin\/2025\/33-11397.pdf<\/p>\n
The content of this article is intended to provide a general
\nguide to the subject matter. Specialist advice should be sought
\nabout your specific circumstances.<\/p>\n","protected":false},"excerpt":{"rendered":"Troy Tessem\u2019s articles from Foley & Lardner are most popular:
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