The US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have jointly unveiled sweeping criminal and civil charges against two men accused of orchestrating a massive water vending machine Ponzi scheme that defrauded investors of more than $200 million. Federal prosecutors described the case as one of the most brazen and damaging frauds in recent years, targeting retail investors, including military veterans, through false promises and deception.

At the center of the case is 49-year-old Ryan Wear, a resident of Everett, Washington, and former owner of Water Station Management, a company that marketed and sold water vending machines to investors. According to prosecutors, Wear raised more than $200 million from investors by claiming that his company operated and maintained high-tech water vending machines across the United States.

Investors were told they could purchase these machines and receive a steady stream of income from water sales. In reality, many of the vending machines did not exist. Instead, Wear allegedly used funds from new investors to pay earlier investors, a classic hallmark of a Ponzi scheme.

By perpetuating this cycle, Wear allegedly kept the scheme afloat for years before the company was forced into bankruptcy in August 2023. The collapse left thousands of investors, including retirees and veterans, facing devastating financial losses.

The scandal also ensnared Jordan Chirico, a 41-year-old former portfolio manager from Carmel, Indiana. Chirico was accused of using his professional position to funnel more than $100 million of his clients’ money into bonds issued by Water Station Management.

Prosecutors allege that Chirico concealed his personal financial stake in the company and later continued to invest client money in the business even after he knew it was fraudulent. His conduct allegedly enriched himself while deepening the losses suffered by his clients, who trusted him to act as a fiduciary.

Chirico was indicted separately on charges of investment advisor fraud for his role in deceiving 3|5|2 Capital ABS Master Fund LP, an investment vehicle associated with Jefferies Financial Group’s Leucadia Asset Management. By hiding conflicts of interest and knowingly pouring millions into a scam, Chirico allegedly violated both securities laws and the ethical duties expected of financial professionals.

Both men face severe legal consequences. Wear is charged with securities fraud and wire fraud, while Chirico faces charges of investment advisor fraud. If convicted, each man could face up to 20 years in federal prison.

In addition to criminal charges, the SEC filed civil charges against both defendants, accusing them of violating antifraud provisions of federal securities laws. These civil cases could lead to monetary penalties, disgorgement of profits, and permanent bans from participating in the securities industry.

Federal officials emphasized the seriousness of the case, highlighting how the defendants exploited vulnerable communities, including US military veterans, for personal gain.

Manhattan US Attorney Jay Clayton condemned the scheme in stark terms:

“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. 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. One fraud does not excuse another.”

Clayton added that the DOJ will continue to “aggressively pursue financial frauds on Wall Street and Main Street,” signaling a renewed focus on holding fraudsters accountable, regardless of their position or professional background.

FBI Special Agent in Charge W. Mike Herrington, based in Seattle, echoed those sentiments, emphasizing both the scale of the losses and the unconscionable nature of the deception.

“The scale of this fraud, which resulted in at least $200 million in losses, is simply staggering. And the deception and obfuscation these two men allegedly engaged in to siphon funds from retail investors, even US military veterans, is absolutely unconscionable.”

The case highlights several recurring patterns in large-scale financial frauds. First, the promise of consistent, high returns with minimal risk remains an effective lure, particularly for retail investors who may lack the resources to conduct thorough due diligence. In this case, investors were persuaded by the apparent simplicity of the business model – vending machines selling water – and the promise of stable, passive income.

Second, the targeting of military veterans reflects a disturbing trend. Fraudsters often seek out tight-knit communities, such as veterans or retirees, where trust can be more easily exploited. In many instances, once a few members of a community invest, word-of-mouth helps the scheme spread rapidly.

Finally, the involvement of a professional fund manager like Chirico adds a particularly troubling dimension. Investors reasonably assume that professionals entrusted with managing millions in assets operate with integrity and expertise. Instead, Chirico allegedly betrayed his fiduciary duty, not only concealing conflicts of interest but continuing to invest in a scheme he knew was fraudulent.

The indictment serves as a cautionary tale for both investors and regulators. For investors, it underscores the importance of skepticism and due diligence, especially when returns seem too good to be true. Even seemingly legitimate businesses – in this case, vending machines, a product most people encounter daily – can be twisted into vehicles for fraud.

For regulators, the case highlights the ongoing challenges of detecting and disrupting frauds that masquerade as legitimate investment opportunities. While the SEC and DOJ ultimately intervened, many victims had already lost their life savings by the time enforcement actions began.

The case also reflects a broader concern about transparency in private investment funds. The fact that a fund linked to a major financial group like Jefferies was caught up in this scandal raises questions about internal oversight and the effectiveness of safeguards designed to prevent such abuse.

Both Wear and Chirico are awaiting trial in Manhattan federal court. If convicted, they could spend decades behind bars. Meanwhile, bankruptcy proceedings for Water Station Management continue, though prospects for investors to recover meaningful sums remain slim, given the scale of the losses.

The SEC’s civil case will likely run in parallel, aiming to secure restitution for victims and to permanently bar both men from the securities industry. For many of the victims – including military veterans who saw the scheme as a safe investment – justice may come too late to repair the financial damage inflicted.

The unraveling of the $200 million water vending machine Ponzi scheme underscores the devastating impact of financial fraud on ordinary Americans. It is a reminder that scams do not always come in the form of exotic investment products or complex financial engineering. Sometimes, they are hidden in plain sight, disguised as everyday businesses promising stability and trust.

As federal prosecutors pursue their case against Wear and Chirico, the victims – from small retail investors to veterans who dedicated their lives to public service – remain a stark reminder of the human toll of financial deception. For them, the pursuit of justice may provide some solace, but it will not undo the staggering losses inflicted by a scheme built on lies.

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