SEC Pursues Accounting Fraud Case Against Former AMMO Executives

Federal securities regulators have filed sweeping fraud charges against three former senior executives of AMMO, Inc., alleging a coordinated scheme to conceal the role of a banned executive, manipulate financial metrics, and hide millions in undisclosed related-party transactions. The 63-page complaint, filed in the U.S. District Court for the District of Arizona, underscores the Securities and Exchange Commission's continued enforcement focus on accounting fraud despite recent staffing reductions at the agency.

The case against former CEO Fred W. Wagenhals, former CFO Robert D. Wiley, and co-founder Christopher D. Larson highlights growing regulatory scrutiny of corporate governance failures and the use of non-GAAP financial metrics to mislead investors. The SEC also settled administrative charges against the company itself in a parallel proceeding.

Background and Context

The enforcement action comes amid ongoing debate about the SEC's enforcement priorities under new leadership. Despite staffing reductions reported in 2024, the agency has maintained its focus on individual accountability in financial reporting cases. The current case demonstrates how regulators continue to pursue complex accounting fraud schemes that span multiple years and involve sophisticated concealment tactics.

Accounting fraud cases have been a cornerstone of SEC enforcement since the passage of the Sarbanes-Oxley Act of 2002, which imposed stricter disclosure requirements and created new penalties for corporate misconduct. The AMMO case illustrates how these provisions, particularly the clawback requirements under Section 304, continue to serve as enforcement tools decades after their enactment.

Key Figures and Entities

At the center of the SEC's complaint is Christopher D. Larson, who allegedly served as a de facto senior executive from 2017 to 2022 despite a federal court judgment in 2020 barring him from officer or director roles at any public company. According to court documents in SEC v. Wagenhals, Wiley, and Larson (Case No. 2:25-cv-04696), Larson led negotiations for AMMO's $240 million acquisition of GunBroker.com, oversaw capital raises, and directed investor relations strategy while being systematically excluded from official disclosures.

Former CEO Fred W. Wagenhals and former CFO Robert D. Wiley are accused of knowingly concealing Larson's involvement from auditors and shareholders. The complaint alleges that they misled two separate audit firms about Larson's employment status, even creating backdated documentation to suggest his separation while internal communications showed his continued active involvement in corporate decisions.

Legal and Financial Mechanisms

The SEC's complaint alleges violations of fundamental securities laws, including antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Two of the executives face additional charges for falsifying corporate books and records, misleading auditors, and submitting false certification statements in violation of Sarbanes-Oxley requirements.

Of particular concern are the alleged violations of SEC Regulation S-K Item 404, which requires disclosure of related-party transactions. The complaint details several undisclosed arrangements, including payments exceeding $25 million to Larson's brother's construction company and an alleged $814,000 kickback scheme involving a payment processor and Larson's consulting firm. These transactions were only revealed following a 2025 financial restatement initiated after a special committee investigation.

The SEC also alleges manipulation of non-GAAP metrics, specifically Adjusted EBITDA. In one quarter, Wiley allegedly changed the calculation method to add back excise taxes, converting a negative result to positive $976,521 without disclosing the methodology change to investors. Additionally, Larson is accused of improperly capitalizing investor relations expenses, allegedly inflating net income in fiscal year 2022 by more than 17%.

International Implications and Policy Response

The AMMO case demonstrates ongoing challenges in regulating corporate disclosure and the treatment of executive officers in financial reporting. Regulators have increasingly emphasized that "executive officer" status depends on actual duties rather than formal titles, a principle that has significant implications for corporate governance structures across public companies.

The enforcement action also highlights concerns about the use of non-GAAP financial metrics, which have faced increased scrutiny from regulators seeking to ensure consistent and transparent reporting. The SEC's focus on individual accountability, particularly clawback provisions under Sarbanes-Oxley, signals continued regulatory emphasis on personal liability for corporate misconduct.

For investors and market participants, the case serves as a reminder of the importance of disclosure controls and transparent governance practices. It demonstrates how regulatory bodies continue to pursue enforcement actions even amid resource constraints, particularly when individual executives are alleged to have engaged in deliberate misconduct.

Sources

This report draws on the SEC administrative proceeding, federal court filings in SEC v. Wagenhals, Wiley, and Larson (Case No. 2:25-cv-04696), securities laws including the Securities Act of 1933 and Securities Exchange Act of 1934, and SEC Regulation S-K Item 404 regarding related-party transaction disclosures.