Instant Ponzi – Just Add Water

This Week In Blunders – Aug. 10-16

“Ponzi schemes don’t trickle down, they siphon up.” – Heather Marsh

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America’s fighting men and women come home thirsty. What they need is an $8,500 vending machine that spits out purified water.

Enter Water Station Management and the WST-700, the brainchild of Ryan Wear, an Everett, Wash., vending machine entrepreneur.

Wear, 49, built his empire selling his WST-700 vending machines to veterans looking for passive income. But instead of a revenue stream, they got soaked in a $275 million alleged Ponzi scheme, according to an indictment unsealed on Thursday.

“Hey, we got more water out of the Iraqi desert.” (Illustration: ChatGPT)

Some investors were sold machines that didn’t exist. Others got machines Wear had sold to several others at the same time. Overall, the machines didn’t deliver the promised cash flow, prosecutors alleged.

Read More: 15 Tales Of Lost Ponzi Riches

Who knew you could build such a huge Ponzi scheme out of water? Not oil. not gold, not bitcoin, not even Beanie Babies. Just a little H-2-Oh no.

We all know how this story goes.

Water Station filed bankruptcy in August 2024. Most of the money allegedly went to perpetrate the scheme with new investor money going to pay off old investors. And all the while, Wear enriched himself, spending his investors’ money on real estate and other vending businesses, according to the indictment.

So far, Wear has not commented on the case.

Compounding the alleged fraud was investment advisor Jordan Chirico, 41, of Carmel, Ind, who managed a portfolio for Jefferies' Leucadia Asset Management.

Chirico, who was also charged, invested $7 million of his own money in Water Station. Then he put $100 million of Jeffries’ customers’ money into Water Station bonds without disclosing his interest, prosecutors allege.

Chirico‘s lawyer told Reuters he was a victim, not a perpetrator.

Still, what kind of investment adviser makes a $100 million bet on peddling water dispensers to war-weary veterans? Or should I say ex-investment advisor? Jeffries, which was not charged, apparently flushed him out.

“The deception and obfuscation these two men allegedly engaged in to siphon funds from retail investors, even U.S. military veterans, is absolutely unconscionable,” the FBI’s W. Mike Herrington said in a statement.

And $8,500 for a non-existent WST-700 water vending machine? Somewhere, a Brita pitcher is laughing.

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PNC can go fly a kited check

Dan Herbatschek, a mathematician who founded a New York tech company, just might be a candidate for the Guinness World Records.

Pittsburgh-based PNC bank filed a lawsuit on Thursday alleging that Herbatschek kited 81 checks totaling $73.7 million, which has got to be some kind of record.

The bank says it didn’t catch everything it alleges that he did, and that it is out $27 million.

Herbatschek, founder of Ramsey Theory Capital, hasn’t commented on the case and these are merely civil allegations.

The bigger question is, what kind of bank loses tens of millions of dollars clearing bad checks? Isn’t this the oldest stunt in banking book? Where were the controls?

“Despite PNC’s vigilance, the damage had been done,” PNC said in its lawsuit.

Some vigilance. Why rob a bank when you can open a checking account at PNC?

Incidentally, Herbatschek, whose last name ends with “chek,” was prominently featured in a Wall Street Journal story on May 15.

The headline said, “The Ultra Wealthy Are Riding Out the Market Chaos in Luxury Real Estate.” Here’s what it reported about Herbatschek, who it placed as the leading anecdote in the story:

“In early May, he signed a $12.25 million contract on a five-bedroom Upper East Side condo for himself, his wife and three children. He is also buying three investment properties priced between $2 million and roughly $5.5 million.”

Nice buying spree. Just hope the ‘chek’s in the mail.

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Momma don’t take my Kodachrome

Here’s another one for the record books: Eastman Kodak invented the digital camera in 1975, but it shelved the technology so it could keep selling film.

Kodak has been reeling for 50 years following this Luddite decision, yet somehow it still lives.

The digital photography revolution that Kodak could have led eventually pushed it into Chapter 11 bankruptcy in 2012. Kodak emerged a year later as a smaller, weaker and much more boring company.

A recent resurgence in film photography hasn’t really helped. Most people use smart phones that never seem to run out of film.

On Monday, Kodak reported that its finances “raise substantial doubt about the Company’s ability to continue as a going concern.”

Then on Tuesday, it put out a statement saying that this little alarm bell was merely one of those pesky ol’ required disclosures, and that it has every confidence it can make it through its current challenges.

Kodak sang it almost as well as Paul Simon:

“They give us those nice bright colors;
Give us the greens of summers;
Makes you think all the world’s a sunny day, oh yeah.”

But nobody is writing songs about Kodak anymore.

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