$275 Million Fraud Case
The U.S. Securities and Exchange Commission (SEC) has filed charges against Ryan Wear, founder of Water Station Management LLC and Creative Technologies, Inc., for orchestrating two Ponzi-like schemes that defrauded investors out of more than $275 million. Alongside Wear, portfolio manager Jordan Chirico faces charges for breaching his fiduciary duties by directing client funds into the fraudulent enterprise despite glaring red flags.
This case represents one of the most significant fraud enforcement actions in recent years, spanning nearly a decade and targeting both retail and institutional investors. The following is an analysis of the allegations made by the SEC in its complaint. Please keep in mind that these are only allegations, the SEC’s side of the story, without a response from Mr. Wear or Mr. Chirico. The SEC still must prove these allegations.
How the Fraud Was Structured
Scheme One: Retail Investors and Nonexistent Water Machines
- Timeline: September 2016 – September 2023
- Amount Raised: Over $165 million
- Target Victims: Retail investors, including military veterans
- Pitch: Investors were told they were purchasing water machines that would generate long-term revenue streams.
- Reality: Thousands of machines did not exist, were double-sold to multiple investors, or failed to produce revenue.
Scheme Two: Institutional Investors and Fabricated Notes
- Timeline: April 2022 – February 2024
- Amount Raised: Over $110 million
- Method: Sale of “Water Station notes” purportedly secured by water machine collateral.
- Deception: Most machines did not exist or were not owned by Water Station.
- Misappropriation: More than $60 million of investor funds were redirected to Ponzi-style payouts and Wear’s unrelated ventures.
Misuse of Investor Funds
Beyond the alleged fabricated machinery and false guarantees, investor money was siphoned off to fund Wear’s other businesses, including:
- Refreshing USA, LLC
- Ideal Property Investments LLC
Both companies are named as relief defendants in the SEC’s complaint, accused of benefiting from illicitly diverted funds.
The Role of Portfolio Manager Jordan Chirico
Fiduciary Duty Violations
According to the SEC, While Wear orchestrated the fraudulent enterprise, Chirico’s actions compounded investor losses. As a portfolio manager:
- He steered his private fund client into Water Station investments.
- He failed to disclose personal investments in the scheme, creating significant conflicts of interest.
- Despite identifying obvious red flags — such as questionable collateral and unrealistic guarantees — Chirico increased his fund client’s exposure.
This failure to uphold fiduciary duties is a critical breach, highlighting systemic risks when advisers prioritize personal gain over client protection.
Legal Actions Taken
SEC Complaints and Civil Remedies
The SEC has filed separate complaints against Wear and Chirico in the U.S. District Court for the Southern District of New York. The charges include violations of federal securities laws’ antifraud provisions.
Remedies Sought by the SEC:
- Injunctive relief to prevent further misconduct.
- Civil penalties against all defendants.
- Disgorgement of ill-gotten gains to return funds to victims.
- Officer and director bar against Wear to prevent him from serving in leadership roles of public companies.
Parallel Criminal Proceedings
In a coordinated effort, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against both Wear and Chirico. This dual track of civil and criminal action underscores the seriousness of the fraud.
Broader Impact on Investors
Financial Losses and Trust Erosion
The SEC claims that these schemes targeted over 250 investors, many of them retail investors and veterans, lured by promises of guaranteed returns and exclusive financing options. The fallout includes:
- Massive financial losses for investors.
- Erosion of trust in private fund managers and investment advisers.
- Heightened scrutiny from regulators on alternative investment structures involving physical assets.
Enforcement Priorities and Regulatory Lessons
SEC’s Focus on Investor Protection
This case and the vast allegations, demonstrate the need for experienced securities defense counsel to address these allegations. This case also illustrates the SEC’s focus on combating Ponzi-like structures and highlights regulatory priorities:
- Full disclosure of conflicts of interest by investment advisers.
- Verification of collateralized assets in private placements.
- Stronger compliance and oversight for advisory firms managing pooled investments.
For more information, contact the securities lawyers at Sallah Astarita & Cox, at 212-509-6544 or visit Securities Lawyer
