Ex-Jefferies fund supervisor faces prison investigation over alleged Ponzi-like rip-off

Manhattan federal prosecutors are investigating Jordan Chirico and allegations by the fund, 352 Capital, that he knowingly invested its cash in a Ponzi-like rip-off, stated an individual aware of the matter, who requested to not be recognized discussing the probe. Chirico has acquired a grand jury subpoena as a part of an investigation, in line with court docket papers filed in August in a separate civil matter involving him and 352.

The federal government probe marks an escalation in scrutiny of Chirico’s administration of 352, which was a part of Jefferies’ Leucadia Asset Administration arm. Jefferies began winding down the fund over the summer time, and 352 sued Chirico and others, alleging fraud, in July.

In line with the swimsuit, Chirico directed the acquisition of a giant amount of bonds issued by WaterStation Administration, an organization that claimed to function 1000’s of filtered water merchandising machines. His former employer claims Chirico knew these machines didn’t exist however continued to put 352’s cash within the scheme partially to recoup his personal funding.

Water Machine Franchises

The investigation might not lead to prices. Neither Chirico nor his legal professionals responded to requests for remark, however they’ve stated in court docket filings that he was wrongfully terminated and have known as the allegations within the 352 swimsuit unsubstantiated.

The filings that referenced an investigation had been submitted by Chirico and 352 as a part of a Delaware court docket combat over whether or not his Leucadia employment settlement requires the fund to cowl the previous portfolio supervisor’s authorized prices in each the fraud swimsuit and the prison probe. 

The Manhattan US legal professional’s workplace declined to touch upon the existence of an investigation. Jefferies additionally declined to remark.

In line with the 352 swimsuit, WaterStation claimed that it each owned and franchised its water machines. The corporate presupposed to be issuing bonds to buy and deploy extra machines, together with for franchisees, 352 says.

“As an alternative of buying and working water machines, WaterStation Administration used the bond proceeds primarily to pay ‘franchisees’ their assured returns on their ‘funding,’ or to purchase out franchisees who had raised complaints in regards to the enterprise — a traditional Ponzi scheme,” 352 stated in its criticism. 

Battle of Curiosity

The fund claims these bought-out franchisees included Chirico and his spouse, who allegedly invested $7 million of their very own cash in WaterStation franchises. This was a battle of curiosity Chirico didn’t confide in 352 earlier than he began investing the fund’s cash, in line with the swimsuit.

Chirico, who joined Leucadia in 2020, allegedly first purchased WaterStation bonds with 352 funds in April 2022, investing $15 million. In December 2023, Chirico doubled down on 352’s funding in WaterStation, regardless of understanding it was a fraud, the fund says. He allegedly additional elevated 352’s funding to almost $107 million over the following couple of months. 

Leucadia fired Chirico in early June, in line with the lawsuit. He then joined restaurant chain FAT Manufacturers Inc. as head of debt capital markets. He stepped down from that job weeks later, shortly after 352 filed its swimsuit on July 3. FAT stated in a press release on the time that Chirico was leaving to concentrate on defending himself from 352’s swimsuit.

A number of different traders have sued Everett, Washington-based WaterStation and its founder, Ryan Put on. One group suing in Washington state court docket says the corporate raised about $100 million from lots of of unsuspecting traders by promising returns of between 12% and 20%. Traders say they had been instructed their funds could be used to buy water merchandising machines at retail places throughout the US.

Neither Put on nor WaterStation responded to messages looking for remark. A Washington state court docket decide positioned the corporate into receivership in Could and eliminated Put on as supervisor final month.