Two men are facing criminal and civil charges in what authorities said was a Ponzi-like scheme involving water vending machines that swindled hundreds of investors.
The Securities and Exchange Commission announced that it has charged Ryan Wear, of Marysville, Washington, and his entities, Water Station Management LLC and Creative Technologies, Inc., with operating the scheme. Also charged was portfolio manager Jordan Chirico, of Carmel, Indiana, for violating his fiduciary duty by investing his private fund client in Water Station despite his undisclosed conflicts of interest and awareness of red flags. The alleged actions, spanning the period from September 2016 to February 2024, raised over $275 million from over 250 investors.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, states that Wear, Water Station, and Creative Technologies raised over $165 million, primarily from retail investors including veterans, by offering and selling investment contracts in which investors supposedly purchased water machines that would generate revenues. But In reality, it is alleged that thousands of the water machines did not exist or had already been sold to other investors.
The defendants are also accused of raising more than $110 million from investors in a second scheme through the issuance of Water Station notes purportedly secured by water machines. As with the first scheme, the SEC said most of the water machines did not exist or were not owned by Water Station. Over $60 million of investor funds were misappropriated to make Ponzi-like payments to other investors and fund Wear’s other business ventures, including Refreshing USA, LLC and Ideal Property Investments LLC, according to the complaint.
Chirico was accused of directing his private fund client to purchase Water Station notes without disclosing his significant personal investment in the business. The complaint alleges Chirico failed to act in the client’s best interests by causing it to substantially increase its investments in the notes despite signs that some of the purported water machine collateral may have been fabricated.
“Wear’s alleged scheme spanned more than seven years and ensnared hundreds of investors, including veterans who were solicited with higher guaranteed returns and exclusive financing options,” said Corey Schuster, Chief of the Division of Enforcement’s Asset Management Unit. “Furthermore, it is fundamental to the advisory relationship that investment advisers like Mr. Chirico act in their clients’ best interests and disclose all material conflicts of interest. As alleged, Mr. Chirico failed to do so here while increasing his fund client’s investments in Water Station in the face of red flags.”
The defendants are charged with violating antifraud provisions of the federal securities laws. The SEC is seeking injunctive relief and civil penalties against the defendants, disgorgement of ill-gotten gains against the defendants and relief defendants, and an officer and director bar against Wear.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Wear and Chirico over the same allegations. Wear was charged with securities fraud and wire fraud, while Chirico was charged with investment adviser fraud.
“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,” U.S. Attorney Jay Clayton said. “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. One fraud does not excuse another.”
The attorneys at Hyman Cotter PC are uniquely qualified to represent individual investors in investment-related claims against financial professionals and their firms. We understand how financial professionals and their firms are supposed to operate through decades of experience working for the SEC and firms like Morgan Stanley and UBS Financial Services. While in private practice, we have represented individual clients and firms in investment loss matters. If you have suffered investment losses as a result of misconduct by your financial professional or their firms, contact us at 312-291-4600 or through our online contact form for a free consultation.
