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.
[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
