The Securities and Exchange Commission announced today that it has charged Ryan Wear, of Marysville, Washington, along with his entities, Water Station Management LLC and Creative Technologies, Inc., for orchestrating two intertwined Ponzi-like schemes. These operations, which ran from September 2016 to February 2024, reportedly amassed over $275 million from more than 250 investors. In a separate yet related enforcement action, the SEC also brought charges against portfolio manager Jordan Chirico, based in Carmel, Indiana, alleging that he violated his fiduciary duty by directing his private fund client to invest in the scheme despite undisclosed conflicts of interest and clear warning signs.
Corey Schuster, Chief of the Division of Enforcement’s Asset Management Unit, emphasized the gravity of the allegations, stating, “Wear’s alleged scheme spanned more than seven years and ensnared hundreds of investors, including veterans who were solicited with higher guaranteed returns and exclusive financing options.” Schuster further underscored the fundamental obligation of investment advisers like Mr. Chirico to act in their clients’ best interests and disclose all material conflicts of interest, an obligation he purportedly failed to meet while increasing his fund client’s investments in Water Station amidst numerous red flags.
According to the SEC’s complaint against Wear, Water Station, and Creative Technologies, the defendants raised over $165 million between September 2016 and September 2023. This was primarily achieved by offering and selling investment contracts for supposed water machines to retail investors, notably including veterans. In reality, the complaint alleges, thousands of these water machines either did not exist or had already been sold to other investors. A second, related scheme, operating from April 2022 to February 2024, saw these defendants raise more than $110 million from institutional investors through the issuance of Water Station notes, purportedly secured by water machines. Similar to the first scheme, most of the supposed collateral—the water machines—were either non-existent or not owned by Water Station, the complaint states. The defendants are also accused of misappropriating over $60 million of investor funds, using them for Ponzi-like payments to other investors and to finance Wear’s other business ventures, including Refreshing USA, LLC and Ideal Property Investments LLC, which are named as relief defendants in the complaint.
The separate complaint against Chirico details his alleged violation of fiduciary duty to his private fund client. It asserts that he directed the fund to purchase Water Station notes without disclosing his own significant personal investment in the business. Furthermore, Chirico is alleged to have failed to act in the fund client’s best interests by substantially increasing its investments in these notes despite emerging red flags that suggested some of the purported water machine collateral might have been fabricated.
Filed in the U.S. District Court for the Southern District of New York, the SEC’s complaints charge the defendants with violating antifraud provisions of the federal securities laws. The Commission is seeking injunctive relief and civil penalties against the defendants, disgorgement of ill-gotten gains from the defendants and relief defendants, and an officer and director bar against Wear.
In a parallel enforcement effort, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against both Ryan Wear and Jordan Chirico.
The SEC’s extensive investigation was conducted by Heather L. Shaffer, Ming Ming Yang, and Brian Fitzpatrick from the Asset Management Unit, along with David Zetlin-Jones, Jordan Baker, Neal Jacobson, and Patricia Schrage of the New York Regional Office. Supervision for the investigation was provided by Lee A. Greenwood and Mr. Schuster, also of the Asset Management Unit. The ensuing litigation will be spearheaded by Mr. Zetlin-Jones, Ms. Shaffer, and Ms. Yang. The SEC extends its appreciation to the U.S. Attorney’s Office for the Southern District of New York, the U.S. Attorney’s Office for the Western District of Washington, the U.S. Postal Inspection Service, the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation, the Small Business Administration Office of Inspector General, the Federal Deposit Insurance Corporation Office of Inspector General, and the Washington State Department of Financial Institutions for their invaluable assistance.