A former Jefferies Monetary Group hedge fund supervisor who was sued for allegedly defrauding the fund out of greater than $100 million can be going through a federal felony 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, stated an individual conversant in 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 accordance with courtroom 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 response to the go well with, Chirico directed the acquisition of a big 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 partly 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 courtroom filings that he was wrongfully terminated and have known as the allegations within the 352 go well with unsubstantiated.
The filings that referenced an investigation have been submitted by Chirico and 352 as a part of a Delaware courtroom struggle over whether or not his Leucadia employment settlement requires the fund to cowl the previous portfolio supervisor’s authorized prices in each the fraud go well with and the felony probe.
The Manhattan US legal professional’s workplace declined to touch upon the existence of an investigation. Jefferies additionally declined to remark.
In response to the 352 go well with, 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 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 speak in confidence to 352 earlier than he began investing the fund’s cash, in accordance with the go well with.
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 figuring out 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 accordance 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 go well with on July 3. FAT stated in an announcement on the time that Chirico was leaving to give attention to defending himself from 352’s go well with.
A number of different buyers have sued Everett, Washington-based WaterStation and its founder, Ryan Put on. One group suing in Washington state courtroom says the corporate raised about $100 million from a whole bunch of unsuspecting buyers by promising returns of between 12% and 20%. Traders say they have been informed their funds can be used to buy water merchandising machines at retail areas throughout the US.
Neither Put on nor WaterStation responded to messages looking for remark. A Washington state courtroom decide positioned the corporate into receivership in Could and eliminated Put on as supervisor final month.
