Jefferies Financial Group’s hedge fund, 352 Capital, is pursuing the recovery of millions of dollars in compensation from former portfolio manager Jordan Chirico, alleging his involvement in a $100m fraudulent scheme, according to a report by Bloomberg.
In a revised complaint filed Monday in Manhattan federal court, 352 Capital claims that Chirico knowingly invested in bonds issued by WaterStation Management, a Seattle-based water vending machine company, despite being aware of alleged fraudulent practices within the company. Jefferies accuses Chirico of acting as a “faithless servant” and is seeking to reclaim all compensation paid to him from September 2022 until his termination in June 2024, which totals approximately $5.3m since he joined the fund in May 2020.
This lawsuit is part of a broader legal action by Jefferies’ Leucadia Asset Management unit, which initially filed suit against Chirico and others in July. Earlier this month, Chirico requested dismissal of the initial complaint, asserting he was unaware of any alleged fraud at WaterStation and claiming he, too, was a victim.
The amended complaint contends that WaterStation issued bonds purportedly to fund filtered water vending machines. However, 352 Capital alleges that WaterStation falsified purchase records and primarily used bond proceeds to pay off “franchisees,” a group that the fund claims includes Chirico.
Both WaterStation and Chirico are under scrutiny from the US Department of Justice. In a separate civil suit regarding legal fees, Chirico’s attorneys confirmed his cooperation with the US Attorney’s office in Manhattan, including participation in voluntary interviews.
Additional defendants in 352’s lawsuit include WaterStation founder Ryan Wear and other company officials. In May, a Washington state judge placed WaterStation under receivership, and in August, Wear was removed as the company’s manager. Last week, US District Judge Valerie Caproni temporarily paused 352 Capital’s case against WaterStation and affiliated entities due to ongoing federal bankruptcy proceedings in Texas.