Water ‘Ponzi’ That Burned Jefferies Had Something for Everyone, Until It Didn’t

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— at dispensers all across the country.Most Read from BloombergWhy New York City Has a Fleet of New EVs From a Dead CarmakerIn Trump’s DC Crackdown, the National Park Service Leads Homeless SweepsTrump Takes Second Swing at Cutting Housing Assistance for ImmigrantsGermany Revives a Building Style With a Bleak History: Prefab HousingChicago Schools Seeks $1 Billion of Short-Term Debt as Cash GoneHundreds of investors bought thousands of units, believing in the vision laid out by Ryan Wear, founder of a startup called WaterStation Management. They plunked down $8,500 for each vending machine and then waited for the dispensers to throw off a steady stream of cash. Among those lured in was a product manager in Oregon in 2021 and then, several months later, a dentist in Illinois. Each bought dozens of water dispensers, which Wear's team would install and operate.What they didn’t know is that at least one of those Hylyte-branded machines wound up being sold to both of them: serial number 101962, wedged in between a liquor store and a yoga studio in a strip mall in the Los Angeles suburb of Torrance, according to court records. To make matters worse, a machine with that same serial number was also pledged as collateral to back WaterStation bonds that were sold in April 2022 to the investment bank Jefferies Financial Group Inc.Serial number 101962, faded and rusted in pictures submitted to court, is now gone from that strip mall, WaterStation is in bankruptcy, and Wear, 49, is the target of legal action by federal prosecutors, the Securities and Exchange Commission, a state banking regulator, Jefferies and scores of small-time investors, all of whom claim the company's business was largely an illusion.A photo of the Hylyte dispenser in Torrance, California, filed in federal bankruptcy court. Source: US Federal Bankruptcy Court"This case involves a massive Ponzi scheme," Assistant U.S. Attorney Justin Rodriguez told a federal judge in Manhattan Wednesday after Wear pleaded not guilty to criminal charges. A few feet away sat Jordan Chirico, a former Jefferies fund manager who prosecutors allege also committed fraud, directing his fund to purchase more WaterStation bonds after Wear admitted many water machines didn't exist. He, too, pleaded not guilty. Lawyers for both declined to comment.Voluminous legal filings describe a business that drew in military veterans, stock traders, pharmacists, salespeople and retirees by leveraging growing fears about contaminated tap water and microplastics and offering a lucrative solution that'd churn out annual returns as high as 20%, year after year. That desire to make easy money, coupled with clever marketing and alleged diligence lapses, kept the sputtering business going until the money finally stopped flowing around June 2023, according to court documents.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P 5006,466.91 +96.74 (+1.52%)Dow 3045,631.74 +846.24 (+1.89%)Nasdaq21,496.54 +396.22 (+1.88%)Russell 20002,361.95 +87.85 (+3.86%)VIX14.22 -2.38 (-14.34%)Gold3,418.50 +36.90 (+1.09%)PortfolioSign in to access your portfolioSign inTop gainersOPEN Opendoor Technologies Inc. 5.01 +1.41 (+39.17%)UI Ubiquiti Inc. 510.23 +119.66 (+30.64%)MNSO MINISO Group Holding Limited 26.63 +4.46 (+20.12%)RXO RXO, Inc. 16.97 +2.27 (+15.44%)NIO NIO Inc. 6.34 +0.80 (+14.44%)Top losersNEGG Newegg Commerce, Inc. 100.75 -15.03 (-12.98%)BJ BJ's Wholesale Club Holdings, Inc. 97.11 -9.05 (-8.52%)INTU Intuit Inc. 662.66 -35.10 (-5.03%)DUOL Duolingo, Inc. 331.87 -13.65 (-3.95%)CSX CSX Corporation 34.58 -1.29 (-3.60%)Most activeOPEN Opendoor Technologies Inc. 5.01 +1.41 (+39.17%)NIO NIO Inc. 6.34 +0.80 (+14.44%)INTC Intel Corporation 24.80 +1.30 (+5.53%)NVDA NVIDIA Corporation 177.99 +3.01 (+1.72%)LCID Lucid Group, Inc. 2.0300 -0.0600 (-2.87%)Earnings eventsTrending tickersINTC Intel Corporation 24.80 +1.30 (+5.53%)BTC-USD Bitcoin USD 115,038.17 -1,575.04 (-1.35%)SOL-USD Solana USD 202.75 +5.51 (+2.79%)XRP-USD XRP USD 3.02 -0.07 (-2.22%)ETH-USD Ethereum USD 4,735.24 -84.25 (-1.75%)Top economic events