Latest news with #WaterStationManagement
Mint
2 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
Epoch Times
3 days ago
- Business
- Epoch Times
US Charges Two in $275 Million Water Vending Machine Ponzi Case
NEW YORK--A Washington state entrepreneur and a former Jefferies portfolio manager were criminally charged on Thursday over a Ponzi scheme and related fraud involving water vending machines that totaled as much as $275 million, with military veterans among the victims, U.S. authorities said. Ryan Wear, the former owner of Water Station Management, was charged in Manhattan with securities and wire fraud. Jordan Chirico, who worked at Jefferies' Leucadia Asset Management unit, was charged with securities and investment adviser fraud.
