Federal prosecutors in New York have charged former Jefferies hedge fund manager Jordan Chirico with fraud over the alleged misuse of almost $100m in fund assets tied to a now-bankrupt water-vending machine business, according to a report by Bloomberg.
Chirico, who ran Jefferies’ 352 Capital under its Leucadia Asset Management arm, is accused of directing the fund to buy bonds issued by WaterStation Management, despite knowing many of the vending machines backing the debt didn’t exist. Prosecutors allege Chirico also failed to disclose personal stakes of more than $7m, referral fees, and loan repayments tied to the company.
WaterStation’s owner, Ryan Wear, has also been charged after raising more than $200m from investors, including retail investors and military veterans, in what prosecutors call a “scam.” The SEC has filed parallel civil actions against both men.
According to court filings, 352 Capital has not received any principal repayments on nearly $107m of WaterStation bonds. Chirico faces charges of investment adviser fraud and securities fraud, carrying potential sentences of up to 20 years.
