A former Jefferies Monetary Group hedge fund supervisor who was sued for allegedly defrauding the fund out of greater than $100 million can also be going through a federal legal probe.
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, mentioned an individual aware of the matter, who requested to not be recognized discussing the probe. Chirico has obtained a grand jury subpoena as a part of an investigation, in keeping 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 season, 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 hundreds 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 could not end in expenses. Neither Chirico nor his attorneys responded to requests for remark, however they’ve mentioned in court docket filings that he was wrongfully terminated and have referred to 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 battle 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 legal probe.
The Manhattan US lawyer’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.
“Instead of purchasing and operating water machines, WaterStation Management used the bond proceeds primarily to pay ‘franchisees’ their guaranteed returns on their ‘investment,’ or to buy out franchisees who had raised complaints about the business — a classic Ponzi scheme,” 352 mentioned in its grievance.
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 open up to 352 earlier than he began investing the fund’s cash, in keeping 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 realizing it was a fraud, the fund says. He allegedly additional elevated 352’s funding to just about $107 million over the following couple of months.
Leucadia fired Chirico in early June, in keeping 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 mentioned in an announcement on the time that Chirico was leaving to deal with defending himself from 352’s swimsuit.
A number of different buyers 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 a whole bunch of unsuspecting buyers by promising returns of between 12% and 20%. Buyers say they had been advised their funds could be used to buy water merchandising machines at retail places throughout the US.
Neither Put on nor WaterStation responded to messages searching for remark. A Washington state court docket decide positioned the corporate into receivership in Could and eliminated Put on as supervisor final month.
