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Military veterans among those allegedly defrauded

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Authorities say many water machines didn't exist

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Jefferies ex-manager was victim, not villain, lawyer says

By Jonathan Stempel

NEW YORK, Aug 14 (Reuters) - A Washington state

entrepreneur and a former Jefferies portfolio manager were

criminally charged on Thursday over a Ponzi scheme and related

fraud involving water vending machines that totaled as much as

$275 million, with military veterans among the victims, U.S.

authorities said.

Ryan Wear, the former owner of Water Station Management, was

charged in Manhattan with securities and wire fraud. Jordan

Chirico, who worked at Jefferies' Leucadia Asset

Management unit, was charged with securities and investment

adviser fraud.

The U.S. Securities and Exchange Commission filed related

civil charges against both men and Water Station, saying the

frauds spanned from late 2016 to early 2024.

A lawyer for Wear did not immediately respond to requests

for comment, while a lawyer for Water Station declined to

comment.

Robert Gage, a lawyer for Chirico, said in a statement:

"Today's indictment has the story exactly backward. Jordan

Chirico is not the villain. He's a victim. ... We look forward

to clearing Jordan's name in court."

Authorities said Wear, 49, of Everett, Washington, defrauded

ordinary investors and veterans into buying more than 15,000

purported revenue-generating water machines, and sold bonds he

falsely claimed were collateralized by his machines.

According to court papers, Wear manufactured far fewer

machines than he claimed, sold some to multiple investors, and

used new money to repay earlier investors and cover personal

expenses, including a home on Camano Island near Seattle.

Chirico, 41, of Carmel, Indiana, allegedly breached his

fiduciary duty to investors in Leucadia's 3/5/2 Capital ABS

Master Fund, which he managed, by concealing conflicts of

interest.

Authorities said Chirico bought $107 million of Water

Station bonds for the fund without revealing his $7 million

stake in the company and millions of dollars of distributions

and referral fees.

Chirico allegedly also ignored "red flags" that many water

machines did not exist, and made getting his own money back

before his investors' money a higher priority.

Leucadia is winding down the 3/5/2 fund, which has recovered

none of its bond principal, authorities said.

Water Station was forced into Chapter 11 bankruptcy last

August, two months after Leucadia ended Chirico's employment,

the SEC said. Jefferies and Leucadia were not charged.

"The deception and obfuscation these two men allegedly

engaged in to siphon funds from retail investors, even U.S.

military veterans, is absolutely unconscionable," FBI Special

Agent in Charge W. Mike Herrington said in a statement.