The operator of two alleged Ponzi schemes has been charged alongside a portfolio manager who allegedly invested his fund’s assets in the schemes.
The U.S. Securities and Exchange Commission (SEC) charged Ryan Wear and his companies — Water Station Management LLC and Creative Technologies, Inc. — for allegedly running Ponzi schemes that raised more than US$275 million from investors between September 2016 and 2023. The funds were purportedly to be invested in water vending machines that would generate revenues and returns for investors.
The SEC alleged that the machines either did not exist or had been sold to other investors. It also alleged that Wear “diverted tens of millions of dollars in investment proceeds to pay distributions to earlier investors and to fund Wear’s unrelated business ventures.” By August 2024, the company filed for bankruptcy “in the wake of revelations that Wear had engaged in a fraudulent Ponzi-like scheme in connection with his operation of Water Station,” the regulator reported.
According to the SEC’s complaint, more than US$165 million was raised directly from retail investors, and another US$100 million came from institutional investors between April 2022 and February 2024, through the issuance of notes allegedly secured by water vending machines.
In a separate but related action, the SEC charged fund manager Jordan Chirico of Leucadia Asset Management LLC for allegedly violating his fiduciary duty by investing in the scheme on behalf of an investment fund, 3|5|2 Capital ABS Master Fund LP, after he allegedly learned the venture was likely a Ponzi scheme and without disclosing his significant personal stake in the companies involved.
The SEC alleged that, from 2018 to 2021, Chirico personally invested more than US$7 million in machines purportedly sold and serviced by Water Station and its affiliates. He reportedly received almost US$3 million in distributions from the company and about US$1.5 million in “referral fees” for recommending the company to other prospective investors.
It also alleged that starting in late 2021, Chirico helped coordinate Water Station’s issuance and sale of the notes and invested his fund in them without disclosing his personal stake to his firm or the fund. By late 2023, he allegedly knew the number of machines securing the notes “appeared inaccurate” and that the company faced significant cash shortfalls.
“Despite this knowledge, Chirico increased the 352 Fund’s investments in Water Station notes from US$12.9 million in August 2023 to more than US$90 million by February 2024, while continuing to conceal his personal financial relationships,” the SEC alleged.
Both men also face criminal charges. Wear was charged with one count of securities fraud and one count of wire fraud, while Chirico was charged with one count of investment adviser fraud and one count of securities fraud.
None of the allegations have been proven, and both are presumed innocent of the criminal charges.