Jordan Chirico and Ryan Wear were indicted on federal criminal charges in New York. Collectively, they are charged with orchestrating a Ponzi scheme that duped investors out of over $200 million. On Thursday, the DOJ made the indictments public. This consequential ruling emerges from a high-profile case that has received widespread media coverage, in part due to the fact that retail investors and military service members have been defrauded by the company’s actions.
The criminal charges against Chirico and Wear originated from their relationship with Water Station, a water vending machine company. Chirico is alleged to have defrauded the 3|5|2 Capital ABS Master Fund LP. This investment fund is one of several under the umbrella of the Leucadia Asset Management of Jefferies Financial Group. According to news reports, Chirico’s development company was shoved into bankruptcy last August, adding an additional log to the dumpster fire for investors.
Wear, 49, of Everett, Washington, is charged with similar offenses. If found guilty, both men face a maximum prison sentence of 20 years. The Securities and Exchange Commission (SEC) recently stepped in. In response, they brought civil charges against them for violating antifraud provisions of federal securities laws.
Chirico’s actions are particularly troubling. He allegedly continued to invest clients’ money into Water Station even after recognizing it as a scam. This decision has understandably cast serious ethical clouds over his professional responsibilities.
“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,” said Jay Clayton, SEC Chair. “One fraud does not excuse another. With the assistance of our dedicated law enforcement partners and our colleagues throughout the Department of Justice, this Office will continue to aggressively pursue financial frauds on Wall Street and Main Street.”
The extent of the fraud has also understandably shocked and appalled authorities. “We were shocked at the breadth and depth of this fraud,” said FBI Special Agent in Charge W. Mike Herrington. He said it had led to shocking cuts—at least $200 million in losses so far.
Clayton noted the severe impact of the fraudulent activities on vulnerable groups:
“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.”
Harrington echoed these sentiments, emphasizing the gravity of the allegations against Chirico and Wear:
“And the deception and obfuscation these two men allegedly engaged in to siphon funds from retail investors, even U.S. military veterans, is absolutely unconscionable.”