Latest news with #Chirico
Mint
5 days ago
- Business
- Mint
Dirty Water: Inside the ‘largest franchise fraud in the history of the US'
The pitch offered a 'truly passive, turnkey investment" that was 'ideal for the passive investor." For $8,500 to $10,000, you could own your own vending machine that dispensed one-gallon jugs of locally sourced filtered water that would be installed at grocery stores and other retail locations around the country. In reality, thousands of investors who bought into Water Station Management were paying for vending machines that either didn't exist or had already been sold, according to a civil complaint filed this week by the Securities and Exchange Commission in a federal court in New York. The SEC alleges that the company's head, Ryan Wear, 49, of Washington state, was running a massive Ponzi scheme, what a Water Station insider, an early investor described as a friend of Wear's, referred to as 'the largest franchise fraud in the history of the United States," according to the complaint. In all, the SEC alleges that Wear and his companies raised $275 million from investors, including many veterans, through two interrelated Ponzi schemes. Wear couldn't immediately be reached for comment. Court records didn't indicate that he had retained a lawyer in the matter. The SEC also brought charges this week against Jordan Chirico, a former fund portfolio manager and investment advisor with Leucadia Asset Management, Jefferies Financial Group's alternative investment platform. The commission alleges that Chirico had a substantial personal stake in Water Station and directed a private-fund client to invest in the business without disclosing his financial interest, amounting to a breach of his fiduciary duty. The SEC also says that Chirico continued to ramp up the fund's investment in the company despite warning signs that the water-machine operation was a fraud. Chirico couldn't immediately be reached for comment, and it wasn't clear whether he had retained a lawyer. A Jefferies spokesman declined to comment but confirmed that Chirico no longer works with Leucadia. The Justice Department announced parallel criminal charges against Wear and Chirico this week. 'Ryan Wear raised hundreds of millions of dollars through false promises of a water vending machine business that became nothing more than a scam that victimized retail investors, including military veterans," says Jay Clayton, U.S. attorney for the Southern District of New York and a former SEC chairman. 'Jordan Chirico made matters worse by putting his own financial interests before his professional duties, investing clients' money in Water Station—helping himself and hurting his investors—even after he knew it was a scam." Water Station promised investors annual returns of 12% to 20% through the purchase of the vending machines, which the company said it would install and maintain, according to the SEC's complaint. The commission says that from September 2016 through September 2023, Water Station raised more than $165 million through the purported sale of more than 15,000 machines to about 250 investors. 'In reality," the SEC says, most of those machines 'either did not exist or were previously pledged to other investors." The commission alleges that Wear used the proceeds from those sales to fund unrelated businesses that he controlled and to make Ponzi-like payments to earlier investors. In April 2022, as Wear was struggling to secure fresh investments in Water Station, the SEC alleges that he began selling notes purportedly secured by the water machines to institutional investors, ultimately raising $110 million. Wear said that funds raised through those sales would fund purchases of new vending machines to expand the business, but as with the alleged retail scheme, most of the vending machines that Wear's company 'purported to pledge as collateral for the notes did not exist or were not owned by Water Station," according to the complaint. The commission alleges that Wear and his company 'specifically targeted the veteran community" in their efforts to solicit retail investors. That included promoting the opportunity through veterans' business advocacy organizations and offering veterans favorable terms such as lower minimum investments and higher guaranteed returns. Red flags. The SEC is accusing Chirico of concealing his substantial personal investment in Water Station when he directed his private fund client, a hedge fund called the 3|5|2 Capital ABS Master Fund, to invest in the company. Further, he allegedly arranged for the buyout of his own stake in the company through the sale of the notes and failed to disclose that he had personally made millions of dollars of loans to Wear. By August 2023, Chirico 'had notice of red flags indicating that at least a portion of the purported collateral for the notes may have been fabricated," the SEC says. 'In the face of these red flags, Chirico failed to act in the 352 Fund's best interests by causing the fund to substantially increase its investments in Water Station notes, while continuing to conceal his personal financial entanglements with Water Station and Wear from Leucadia and the fund." The SEC is seeking disgorgement and penalties from Wear and Chirico. It is asking the court to bar Wear from serving as an officer or a director of any company that trades federally registered shares and permanently banning Chirico from working as an advisor or broker. In the criminal cases, Wear is facing one count of securities fraud and one count of wire fraud, each carrying a maximum prison term of 20 years. Chirico is also charged with one count of securities fraud, as well as one count of investment adviser fraud, which carries a maximum penalty of five years in prison. Write to
Yahoo
6 days ago
- Business
- Yahoo
Ex-Jefferies Fund Manager Accused of Water-Machine Scheme
(Bloomberg) -- A former Jefferies Financial Group Inc. hedge fund manager was charged with fraud by federal prosecutors in New York for allegedly directing the purchase of nearly $100 million in bonds tied to a water-vending machine business. The US-Canadian Road Safety Gap Is Getting Wider Sunseeking Germans Face Swiss Backlash Over Alpine Holiday Congestion To Head Off Severe Storm Surges, Nova Scotia Invests in 'Living Shorelines' Five Years After Black Lives Matter, Brussels' Colonial Statues Remain For Homeless Cyclists, Bikes Bring an Escape From the Streets Jordan Chirico is accused of directing the Jefferies fund, 352 Capital, to purchase bonds funding a Washington state business that purported to operate a network of water vending machines, according to an indictment unsealed Thursday in New York federal court. But in many cases, the machines didn't exist, prosecutors allege. The owner of the business, Ryan Wear, was also charged with fraud. Prosecutors said he helped raise more than $200 million from investors by selling them the machines. 'Ryan Wear raised hundreds of millions of dollars through false promises of a water-vending machine business that became nothing more than a scam that victimized retail investors, including military veterans,' interim Manhattan US Attorney Jay Clayton said. 'Jordan Chirico made matters worse by putting his own financial interests before his professional duties.' The US Securities and Exchange Commission filed a parallel civil case against Wear and his businesses and also made separate allegations that Chirico violated his fiduciary duty by investing the private fund in the alleged scheme. Chirico was aware of red flags and didn't disclose his conflicts of interest, the SEC said. Chirico's lawyer Robert Gage called his client a 'victim,' not 'the villain.' 'A federal court already dismissed a nearly identical civil case earlier this year in which Leucadia/Jefferies tried to scapegoat our client for an alleged scheme that deceived him along with hundreds of other investors and major institutions,' Gage said. 'We look forward to clearing Jordan's name in court.' Wear, 49, of Everett, Washington, didn't respond to a voicemail seeking comment. Missing Machines The indictment comes after Jefferies sued Chirico, Wear and others tied to the alleged scheme. The vending business, WaterStation Management, was forced into bankruptcy and has spawned a rash of civil lawsuits from investors who purchased machines. In actuality, most of the machines either didn't exist or had been sold to more than one investor, according to bankruptcy records. Bloomberg News reported in September that federal prosecutors in Manhattan were investigating Chirico. 352 Capital was part of Jefferies's Leucadia Asset Management. Chirico, 41, of Carmel, Indiana, is charged with investment adviser fraud, which carries a maximum sentence of five years in prison, and securities fraud, which has a top punishment of 20 years behind bars. Wear is charged with wire fraud and securities fraud, both of which carry 20-year sentences. Prosecutors allege that Chirico had personally invested more than $7 million in WaterStation, but never disclosed his stake while investing millions of the fund's assets in the company. The government said he also failed to reveal more than $90,000 in monthly payments he received or the $1.6 million he earned for referring friends and relatives to invest. According to the indictment, Chirico sold his interests back to WaterStation without revealing he was being paid by proceeds of the bond offering originating from the Jefferies fund and deliberately omitted that Wear owed him millions in loans and note repayments. Chirico had learned of issues at the company by the summer of 2023, and the following year, Wear admitted to him that thousands of the water machines collateralizing the bonds didn't exist and that he had misappropriated tens of millions of dollars in bond proceeds, prosecutors said. But instead of revealing the issues, Chrico directed the fund to buy another $19 million of additional bonds, the proceeds of which were partially used to repay Chirico, according to the government. 352 hasn't received any principal payments on nearly $107 million worth of WaterStation bonds, prosecutors said. The cases are US v Chirico, 25-cr-365, SEC v Chirico, 25-cv-6715, and SEC v Wear, 25-cv-6713, US District Court, Southern District of New York. --With assistance from Nicola M White and Ava Benny-Morrison. (Updates with details of charges and allegations by prosecutors.) 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CNBC
6 days ago
- Business
- CNBC
DOJ, SEC charge two men in $200 million water vending machine Ponzi scheme
Two men have been indicted in New York on federal criminal charges in connection with a water vending machine Ponzi scheme that allegedly swindled investors out of more than $200 million, the Department of Justice said Thursday. The two men were also hit by the Securities and Exchange Commission with civil charges of violating antifraud provisions of the federal securities laws in connection the same scheme. Ryan Wear, 49, of Everett, Washington, is accused of "raising more than $200 million from investors by selling them water vending machines that, in many cases, did not exist, and paying promised returns through new investor money," the DOJ said in a press release. Wear, who is the former owner and operator of a company called Water Station Management, is charged with securities and wire fraud. His company was forced into bankruptcy last August. The indictment against him in U.S. District Court in Manhattan says that many of the people swindled in the scheme were retail investors and military veterans. Former fund portfolio manager Jordan Chirico, a 41-year-old from Carmel, Indiana, is accused of purchasing more than $100 million in bonds issued by Water Station while "concealing his personal financial stake in the company and, eventually, his knowledge of the fraud that had been perpetrated by Wear," the DOJ said. Chirico is accused of a scheme to defraud 3|5|2 Capital ABS Master Fund LP, an investment fund which was part of Jefferies Financial Group's Leucadia Asset Management. Chirico, who was a manager for the fund, is charged with investment advisor fraud in a separate indictment in Manhattan federal court. Both men face a maximum possible sentence of 20 years in prison if convicted. "The scale of this fraud, which resulted in at least $200 million in losses, is simply staggering," said FBI Special Agent in Charge W. Mike Herrington, who is based in Seattle, Washington. "And the deception and obfuscation these two men allegedly engaged in to siphon funds from retail investors, even U.S. military veterans, is absolutely unconscionable.
Mint
18-06-2025
- Business
- Mint
Jefferies Sues Regional Bank Over Alleged Water Machine Scam
(Bloomberg) -- A Jefferies Financial Group hedge fund widened its legal fight to recover more than $100 million that its former portfolio manager invested in an alleged fraud scheme involving water vending machines. Jefferies' 352 Capital sued Port Angeles, Washington's First Fed Bank last week in Seattle, claiming the First Northwest Bancorp subsidiary was aware of the alleged fraud. But the bank facilitated the scheme in order to prioritize repayment of its own loans to the machine company and its franchisees, 352 said. The suit is the latest twist in the saga of 352's investment in bonds issued by WaterStation Management, which claimed to operate thousands of filtered water vending machines. According to 352, the Everett, Washington-based company used the money raised to pay guaranteed returns to franchisees and insiders in a 'Ponzi scheme,' as well as to repay loans to First Fed. First Northwest disclosed the suit in a June 13 regulatory filing in which it said it strongly disputes the allegations and intends to 'vigorously defend against the claims.' In a Wednesday interview, First Fed Chief Executive Officer Matthew Deines said he felt there was 'no merit' to the suit against the bank. 'We are a 102-year old community bank,' said Deines. 'This is a Wall Street firm that is trying to recoup funds from this. We were a victim like many others.' WaterStation could not be reached for comment. A Jefferies spokesman declined to comment. The litigation began last year when 352, which is part of Jefferies' Leucadia Asset Management arm, sued former portfolio manager Jordan Chirico. The fund claimed that he conspired with WaterStation to have 352 buy bonds backed by thousand of machines that didn't exist. Chirico has denied the claims. He has suggested in court filings that he was victimized by WaterStation and stressed that all of his investment decisions were reviewed and authorized. He accused his former employer of a 'misguided attempt to assign blame.' The case was dismissed by a federal judge last month, but 352 re-filed its claims against Chirico and others in New York state court on June 9. Neither Chirico nor his lawyer could be reached for comment on the re-filed suit Wednesday. According to 352's suit against First Fed, the bank had access to the machines' serial numbers so would have known they didn't exist. The bank was also in charge of holding the proceeds from the bonds in which 352 invested and facilitated their diversion to other loans. The fund says bond proceeds were only supposed to be used to purchase more machines but instead some were used to repay First Fed's loans, to pay WaterStation insiders or retail investors. At its peak, WaterStation and its related companies owed First Fed $30 minion, according to the suit. In its suit against Chirico, who joined 352 in 2020, the fund claimed he first invested $15 million of its money in WaterStation bonds in April 2022. At that time, 352 claims that Chirico and his wife had already invested $7 million of their own money in WaterStation franchises, a conflict he didn't disclose to his employer. He ultimately invested nearly $107 million of 352's money in WaterStation bonds, the fund claims. The fund also sued WaterStation and several people associated with it, including founder Ryan Wear. Wear couldn't be reached for comment. Last month, the Washington State Department of Financial Institutions brought regulatory charges against WaterStation, Wear and other executives. --With assistance from Yizhu Wang. More stories like this are available on
Business Wire
05-05-2025
- Business
- Business Wire
AM Best to Deliver Keynote Address at Insurance Innovators USA Conference
OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best Director Steven Chirico will deliver a keynote speech at the Insurance Innovators USA Conference 2025, which is scheduled for May 19-20, 2025, in Nashville, TN. Chirico will deliver his remarks at 10:05 a.m. (CDT) on Monday, May 19, in a session titled, 'Understanding New and Evolving Risks: Innovating in a Changing Market.' This session is part of the 'CEO Forum - Navigating a Changing Insurance Landscape,' which begins at 9:00 a.m. (CDT). AM Best has been scoring and assessing insurers' innovation efforts since 2020, and Chirico will share data quantifying the advantages of being innovative. Chirico has approximately 30 years' experience in the insurance industry and manages a team of rating analysts with portfolios of commercial and alternative risk insurers, as well as large reinsurers. The event will be held at the Music City Center. Insurance Innovators is a brand of MarketforceLive. For more information, please visit the Insurance Innovators USA event page. the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit
