[1]<\/a><\/p>\nWEAR operated Water Station as a fraudulent investment scheme, deceiving investors about the nature and profitability of the purported business.\u00a0 He raised over $200 million from retail investors and military veterans through multiple fraudulent solicitations, initially claiming that each investment of $8,500 would fund individual water machines generating passive income.\u00a0 He later raised capital through bonds falsely claimed to be collateralized by numerous water vending machines.<\/p>\n
WEAR perpetuated the fraud by manufacturing far fewer water machines than represented, selling the same machines to multiple investors, and claiming machines existed when they did not.\u00a0 The deployed machines failed to generate the revenue promised by WEAR.\u00a0 To satisfy questioning investors, WEAR operated a Ponzi-like scheme, using new investor funds to pay earlier investors while siphoning off millions to expand his traditional vending machine business and cover personal expenses.\u00a0 When he could no longer raise sufficient funds, Water Station was forced into bankruptcy in August 2024, causing at least $200 million in investor losses.<\/p>\n
CHIRICO engaged in a scheme to defraud 3|5|2 Capital ABS Master Fund LP (the \u201c352 Fund\u201d), an investment fund that was part of Jefferies Financial Group\u2019s Leucadia Asset Management.\u00a0 As a portfolio manager entrusted with hundreds of millions in investors\u2019 funds, CHIRICO breached his fiduciary duties by causing the 352 Fund to invest almost $100 million in what he came to learn was a Ponzi scheme while concealing his personal financial stake in Water Station.<\/p>\n
CHIRICO had a significant personal investment in Water Station, holding a joint venture partnership worth over $7 million.\u00a0 When Water Station needed a capital infusion, the company launched a $70 million bond issuance in April 2022.\u00a0 CHIRICO invested millions of the 352 Fund\u2019s assets without fully disclosing his personal stake in Water Station, his monthly payments exceeding $90,000 from Water Station, or the $1.6 million he had received from referring friends and family members to invest in the company.\u00a0 After investing the 352 Fund\u2019s money, CHIRICO sold his interests back to Water Station without disclosing that he was being paid with bond proceeds originating from, among others, the 352 Fund and its investors.\u00a0 CHIRICO also deliberately omitted other conflicts that jeopardized the fund\u2019s investment, including millions of dollars that WEAR and Water Station owed CHIRICO in loan and note repayments.<\/p>\n
By summer of 2023, CHIRICO learned of serious issues at Water Station, including the inability to locate thousands of water machines supposedly collateralizing the bonds.\u00a0 Rather than alert investors, CHIRICO\u2014who was personally owed more than $1 million by WEAR\u2014prioritized his own repayment.\u00a0 In January 2024, WEAR admitted to CHIRICO that thousands of machines collateralizing the bonds did not exist, and that WEAR had misappropriated tens of millions of dollars in bond proceeds.\u00a0 Despite learning of this fraud\u2014which another Water Station investor described to WEAR and CHIRICO as \u201cthe largest franchise fraud case in the history of the United States\u201d\u2014CHIRICO did not disclose Water Station\u2019s problems to the 352 Fund or its investors. Instead, CHIRICO directed the 352 Fund to buy another $19 million of additional Water Station-issued bonds, some of the proceeds of which WEAR used to repay CHIRICO.\u00a0 From April 2022 to February 2024, CHIRICO received from WEAR and Water Station more than $11 million in joint venture earnings, buyouts, and loan and note repayments.\u00a0 The 352 Fund has not received any principal payments on $106.925 million of Water Station bonds, for which CHIRICO caused the fund and its affiliates to pay almost $100 million.<\/p>\n
*\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0*\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0*<\/p>\n
WEAR, 49, of Everett, Washington, is charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.\u00a0 CHIRICO, 41, of Carmel, Indiana, is charged with one count of investment adviser fraud, which carries a maximum sentence of five years in prison, and one count of securities fraud, which carries a maximum sentence of 20 years in prison.<\/p>\n
The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.<\/p>\n
Mr. Clayton praised the outstanding work of the USPIS, FBI, Internal Revenue Service-Criminal Investigation, the Small Business Administration Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General.\u00a0 Mr. Clayton also thanked the U.S. Attorney\u2019s Office for the Western District of Washington and the U.S.\u00a0Securities and Exchange Commission for their assistance and cooperation in the investigation.<\/p>\n
This case is being handled by the Office\u2019s Securities and Commodities Fraud Task Force.\u00a0 Assistant U.S. Attorneys Adam S. Hobson and Justin V. Rodriguez, along with Dane Westermeyer of the Western District of Washington, are in charge of the prosecution.<\/p>\n
The charges contained in the Indictment and Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.<\/p>\n
\u00a0<\/p>\n
[1]<\/a>\u00a0As the introductory phrase signifies, the entirety of the text of the Indictment and Superseding Indictment and the descriptions of the Indictment and Superseding Indictment constitute only allegations, and every fact described should be treated as an allegation.<\/p>\n","protected":false},"excerpt":{"rendered":"United States Attorney for the Southern District of New York, Jay Clayton; Acting United States Attorney for the…\n","protected":false},"author":3,"featured_media":72428,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5122],"tags":[5229,405,403,5226,5225,5228,5227,67,586,132,5230,68,2969],"class_list":{"0":"post-147515","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-new-york","8":"tag-america","9":"tag-new-york","10":"tag-new-york-city","11":"tag-newyork","12":"tag-newyorkcity","13":"tag-ny","14":"tag-nyc","15":"tag-united-states","16":"tag-united-states-of-america","17":"tag-unitedstates","18":"tag-unitedstatesofamerica","19":"tag-us","20":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115032207091598486","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/147515","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=147515"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/147515\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/72428"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=147515"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=147515"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=147515"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}