Dirty water: Inside the 'largest franchise fraud in the history of the US'

Copyright © HT Digital Streams Limit all rights reserved. Kenneth Corbin, Barrons 4 min Read 16 Aug 2025, 03:22 PM IST From September 2016 to September 2023, Water Station collected more than $ 165 million through the alleged sale of more than 15,000 machines to approximately 250 investors. (Beeld: Pixabay) Summary authorities accuse an entrepreneur and its businesses to raise $ 275 million from investors, including many veterans, through two mutually related Ponzi schemes. The pitch offers a ‘truly passive, turnkey investment’ that was ‘ideal for the passive investor’. For $ 8,500 to $ 10,000, you can own your own sales machine that has published one Gallon mugs of filtered water obtained locally that would be installed at grocery stores and other retail locations across the country. In reality, thousands of investors who paid the management of the water station paid for automatically or have been sold, according to a civil complaint filed by the Securities and Exchange Commission in a Federal Court in New York this week. The SEC claims that the head of the company, Ryan Wear, 49, of the state of Washington, was running a massive Ponzi scheme, who is a water station insider, an early investor described as a friend of Wear, “the largest franchise fraud in the history of the United States, according to the complaint. In total, the SEC claims that Wear and his businesses have collected $ 275 million from investors, including many veterans, through two mutually related Ponzi schemes. Slying could not be reached for comment immediately. The court records did not indicate that he retained a lawyer in the case. The SEC also brought charges against Jordan Chirico, a former fund manager and investment adviser of Fund this week, at Leucadia Asset Management, Jefferies Financial Group’s alternative investment platform. The commission claims that Chirico had a significant personal interest in the water station and that a private funds have ordered to invest in the business without disclosing his financial interest, which amounts to a violation of its fiduciary duty. The SEC also says that Chirico continued to increase the fund’s investment in the company, despite warning signs that the Watermachine was a fraud. Chirico could not be reached for comment immediately, and it was not clear whether he retained a lawyer. A spokesman for Jefferies refused 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 has raised hundreds of millions of dollars through false promises of a water sales machine business that has become nothing more than a scam that victimized retail investors, including military veterans,” said Jay Clayton, US lawyer of the southern district of New York and a former Sec chairman. “Jordan Chirico has made matters worse by putting his own financial interests in front of his professional duties, investing clients’ money in the water station – to help himself and hurt his investors – even after he knew it was a scam.” Water station promised investors’ annual returns of 12% to 20% by purchasing the automates, which the company said it would install and maintain it, according to the SEC’s complaint. The commission says that from September 2016 to September 2023 Water Station raised more than $ 165 million through the alleged sale of more than 15,000 machines to about 250 investors. “In fact,” the SEC says, most of the machines “do not exist or have previously been pledged to other investors.” The commission claims that wear and tear used the sales returns to finance unrelated businesses he has controlled and to make Ponzi-like payments to earlier investors. In April 2022, as Wear struggles to secure new investments in the water station, the SEC claims it started selling notes that were allegedly insured by the water machines to institutional investors, and eventually raised $ 110 million. Wear said funds raised by these sales will fund the purchases of new vending machines to expand the business, but just as with the alleged retail scheme, most of the vending machines that Wear’s company “claims to promise as collateral for the notes, according to the complaint, veteran community targeted “in their efforts to request retail investors. This includes promoting the event by organizations of veterans’ business advocacy and the presentation of veterans favorable conditions such as lower minimum investment and higher guaranteed returns. Red flags. Hedging fund called the 3 | 5 | 2 Capital ABS Master Fund, in the company. is, “says the Sec.” In light of these red flags, Chirico did not act in the 352 fund’s best interests by increasing the fund while hiding his personal financial entanglements with the water station and wear and tear of Leucadia and the fund. ” or director of any company that trades federal registered shares and permanently prohibits chirico to work as an advisor or broker. Prisonered in prison.