SEC v. RYAN R. WEAR; WATER STATION MANAGEMENT LLC; and CREATIVE TECHNOLOGIES, INC., No. 1:25-cv-06713, Southern District of New York (Aug. 15, 2025) — Complaint

Lee A. Greenwood
David Zetlin-Jones
Heather L. Shaffer
Ming Ming Yang
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
100 Pearl Street
Suite 20-100
New York, NY 10004-2616
(212) 336-0978 (Zetlin-Jones)
[email protected]

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE
COMMISSION,

                                             Plaintiff,

                        -against-

RYAN R. WEAR,  WATER STATION
MANAGEMENT LLC, and CREATIVE
TECHNOLOGIES, INC.,

                                             Defendants,

                         -and-

REFRESHING USA, LLC, and IDEAL
PROPERTY INVESTMENTS LLC,

                                             Relief Defendants.

COMPLAINT

25 Civ. 6713 (       )

JURY TRIAL DEMANDED

Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
Defendants Ryan R. Wear (“Wear”), Water Station Management LLC (“Water Station”) and
Creative Technologies, Inc. (“Creative”) (collectively, “Defendants”) and Relief Defendants
Refreshing USA, LLC (“Refreshing”) and Ideal Property Investments LLC (“Ideal”) (together,
“Relief Defendants”), alleges as follows:

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SUMMARY
1. From at least September 2016 through February 2024 (the “Relevant Period”),
Defendants raised at least $275 million through the fraudulent offering and sale of securities backed
by water vending machines (“water machines”).  Wear founded and controlled the companies that
purportedly manufactured and serviced the machines:  Creative and Water Station, respectively.
2. Wear effected his fraud by orchestrating two inter-related Ponzi-like schemes,
through which Defendants misappropriated or otherwise diverted tens of millions of dollars in
investment proceeds to pay distributions to earlier investors and to fund Wear’s unrelated business
ventures.
3. Beginning by at least September 2016, Defendants’ first scheme (the “Retail
Scheme”) involved offering and selling investment contracts primarily to retail investors including
veterans.  As part of this scheme, Defendants solicited investors to purchase specifically identified
water machines from Creative, documented in a purchase order.  Water Station agreed to service the
investors’ machines pursuant to an agreement executed at the same time as the purchase order.
Defendants lured investors by touting the prospect and, in some cases, the supposed guarantee, of
lucrative returns, typically ranging between at least 12% and 20% annually.  These returns were
ostensibly generated from the water machines’ vending revenues, as derived from Water Station’s
placement and maintenance of the machines in various retail locations.  From approximately
September 2016 to September 2023, the Retail Scheme raised in excess of $165 million through the
putative sale of more than 15,000 water machines to approximately 250 investors.
4. But in reality, most of the more-than 15,000 water machines Defendants purported
to sell to investors either did not exist or were previously pledged to other investors.  Defendants’
representations to investors that they would earn steady returns from the revenues their machines
generated were also false.  Instead, Wear misappropriated his victims’ investments to fund unrelated

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businesses, including Refreshing and Ideal, and diverted them to make payments to earlier investors
in a Ponzi-like manner.
5. In approximately April 2022, as Defendants struggled to raise new investor money to
sustain the Retail Scheme, Defendants commenced their second scheme (the “Note Scheme”),
which targeted institutional investors.  Pursuant to the Note Scheme, Water Station raised more than
$110 million between April 2022 and February 2024 through the issuance of notes purportedly
secured by Defendants’ water machines (“Notes”).  Water Station procured these investments based
on Wear’s false representation that Water Station would use proceeds of the Notes exclusively to
purchase new water machines from Creative and existing water machines from Retail Scheme
investors, which would generate revenues to pay the Note Scheme investors their promised interest.
6. As with the Retail Scheme, most of the water machines Water Station purported to
pledge as collateral for the Notes did not exist or were not owned by Water Station.  In furtherance
of the Note Scheme, Wear directed the submission of fabricated invoices, purchase orders, and
other financial reports to the trustee bank for the Notes to support the illusion that Water Station
was acquiring or had acquired more than 10,000 water machines to secure the Notes, and to deceive
the trustee bank into releasing the Notes proceeds to fund those purchases.  In fact, Defendants
misappropriated or otherwise diverted approximately $60 million from the Notes proceeds for
unauthorized purposes, including to fund Refreshing and Ideal, to make payments to Retail Scheme
investors, and even to pay Note Scheme investors their required interest payments with their own
money.
7. In approximately mid-2023, Defendants’ scam began to come to light when a
financial firm tasked with independently monitoring the performance of the water machines
purportedly backing the Notes identified significant discrepancies between the water machines Wear
claimed were securing the Notes and the water machines actually generating revenues in the field.

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Wear was unable to explain these discrepancies, leading one Water Station insider (and early Retail
Scheme investor) to conclude that Wear was running “the largest franchise fraud in the history of
the United States.”
8. By mid-2024, Defendants had run out of money to sustain their fraud, and, in
August 2024, Water Station and Creative were placed into receivership and involuntary bankruptcy
proceedings, resulting in Wear’s removal from his position as managing partner at both companies.
To date, most Retail Scheme and Note Scheme investor victims have not recovered their
investments.
VIOLATIONS
9. By virtue of the foregoing conduct and as alleged further herein: (a) Defendants
Wear, Water Station, and Creative violated Section 17(a) of the Securities Act of 1933 (“Securities
Act”) [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange
Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; and (b) Defendant
Wear, as a control person of Water Station and Creative under Exchange Act Section 20(a) [15
U.S.C. §78t(a)], is liable for Water Station’s and Creative’s violations of Exchange Act Section 10(b)
and Rule 10b-5 thereunder.
10. Unless Defendants are restrained and enjoined, they will engage in the acts, practices,
transactions, and courses of business set forth in this Complaint or in acts, practices, transactions,
and courses of business of similar type and object.
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
11. The Commission brings this action pursuant to the authority conferred upon it by
Securities Act Sections 20(b) and 20(d) [15 U.S.C. §§ 77t(b) and 77t(d)] and Exchange Act Section
21(d) [15 U.S.C. § 78u(d)].

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12. The Commission seeks a final judgment: (a) permanently enjoining Defendants from
violating the federal securities laws and rules this Complaint alleges they have violated; (b) ordering
Defendants to disgorge all ill-gotten gains they received as a result of the violations alleged here and
to pay prejudgment interest thereon, pursuant to Exchange Act Sections 21(d)(3), 21(d)(5), and
21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (c) ordering Defendants to pay civil
money penalties pursuant to Securities Act Section 20(d) [15 U.S.C. § 77t(d)] and Exchange Act
Section 21(d)(3) [15 U.S.C. § 78u(d)(3)]; (d) ordering Relief Defendants to disgorge, with
prejudgment interest, all ill-gotten gains by which they were unjustly enriched, pursuant to Exchange
Act Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (e)
permanently prohibiting Wear from serving as an officer or director of any company that has a class
of securities registered under Exchange Act Section 12 [15 U.S.C. § 78l] or that is required to file
reports under Exchange Act Section 15(d) [15 U.S.C. § 78o(d)], pursuant to Securities Act Section
20(e) [15 U.S.C. § 77t(e)] and Exchange Act Section 21(d)(2) [15 U.S.C. § 78u(d)(2)]; (f) permanently
enjoining Wear from, directly or indirectly (including, but not limited to, through any entity owned
or controlled by Wear) participating in the issuance, purchase, offer, or sale of any security,
provided, however, that such injunction shall not prevent Wear from purchasing or selling securities
for his own personal account; and (g) ordering any other and further relief the Court may deem just
and proper.
JURISDICTION AND VENUE
13. This Court has jurisdiction over this action pursuant to Securities Act Section 22(a)
[15 U.S.C. § 77v(a)] and Exchange Act Section 27 [15 U.S.C. § 78aa].
14. Defendants, directly and indirectly, have made use of the means or instrumentalities
of interstate commerce or of the mails in connection with the transactions, acts, practices, and
courses of business alleged herein.

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15. Venue lies in this District under Securities Act Section 22(a) [15 U.S.C. § 77v(a)] and
Exchange Act Section 27 [15 U.S.C. § 78aa].  Certain of  the acts, practices, transactions, and courses
of  business alleged in this Complaint occurred within this District.  Among other things,
Defendants offered and sold securities purportedly backed by water machines to Note Scheme
investors whose principal place of  business was in New York County, and who executed the relevant
transaction documents to acquire the Water Station Notes in this District.
DEFENDANTS
16. Wear, age 49, is a resident of Marysville, Washington.  Wear is the founder and
owner and, until August 2024, was the managing partner of Water Station, Creative, Refreshing, and
Ideal.  Wear also owns and controls dozens of other limited liability companies.
17. Water Station is a Washington limited liability company formed by Wear in 2016
and wholly-owned and controlled by him throughout the Relevant Period.  Water Station placed,
installed, operated, and serviced water machines, which were generally manufactured or sourced by
Creative.  In August 2024, Water Station was put into receivership through a private litigation in
Washington state court, captioned First Fed Bank v. Creative Technologies, LLC, Case No. 24-2-10753-3
SEA (Wa. Super. Ct.) (filed May 14, 2024) (the “Receivership Action”).  Later that month, a creditor
of Water Station filed an involuntary Chapter 11 bankruptcy petition against it, captioned Water
Station Management LLC, No. 24-bk-1864 (Bankr. E.D. Wa.) (filed Aug. 27, 2024) (transferred from
Bankr. S.D. Tex.).  Water Station is now managed by an independent chief restructuring officer, who
also manages Creative and Refreshing.
18. Creative is a Washington limited liability company formed by Wear in 2013.
Throughout the Relevant Period, Creative was controlled and majority-owned by Wear.  Creative
manufactured, sourced, and sold water machines that Water Station placed and serviced around the
country.  In May 2024, Creative was put into receivership through the Receivership Action.  In

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August 2024, a creditor filed an involuntary Chapter 11 bankruptcy petition against Creative,
captioned Creative Technologies, LLC, No. 24-bk-1866 (Bankr. E.D. Wa.) (filed Aug. 27, 2024)
(transferred from Bankr. S. D. Tex.).  Creative is now managed by an independent chief
restructuring officer.
RELIEF DEFENDANTS
19. Refreshing is a Washington limited liability company formed by Wear in 2020.
Throughout the Relevant Period, Refreshing was controlled and majority-owned by Wear.
Refreshing, through its subsidiaries, operated retail vending machines that sold refreshments and
snacks.  Refreshing was put into receivership through the Receivership Action in August 2024.
Later the same month, a creditor filed an involuntary Chapter 11 bankruptcy against Refreshing,
captioned Refreshing USA, LLC, No. 24-bk-1863 (Bankr. E.D. Wash.) (filed Aug. 27, 2024)
(transferred from Bankr. S.D. Tex.).  Refreshing is now managed by an independent chief
restructuring officer.
20. Ideal is a Washington limited liability company formed by Wear in 2019.
Throughout the Relevant Period, Ideal was majority-owned and controlled by Wear.  Ideal owned
commercial and residential real estate across the United States, including warehouses in which water
machines and vending machines were purportedly stored.  In the spring of 2024, Ideal was put into
receivership through a private litigation in First Fed Bank v. Ideal Property Investments, No. 24-2-08418-5
(Wa. Super Ct.) (filed Apr. 14, 2024).  In September 2024, Ideal commenced Chapter 11 bankruptcy
proceedings captioned Ideal Property Investments LLC, No. 24-bk-1421 (Bankr. E.D. Wa.) (filed Sept.
5, 2024).  Ideal is now managed by an independent chief restructuring officer.

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FACTS
I. WEAR FORMS CREATIVE AND WATER STATION TO DEVELOP AND
MONETIZE WATER MACHINES.
A. Background on Wear’s Water Machine Business Model
21. Wear formed Creative in 2013 to develop, manufacture, and sell water machines.
Creative’s water machines filtered water from a local source, allowing customers to purchase gallon-
size containers of filtered water using cash or a credit card.
22. Wear formed Water Station in 2016 to place, install, service, and operate Creative’s
water machines.  Water Station identified and facilitated the placement of Creative’s water machines
at available retail locations around the United States.  Water Station was also responsible for
installing and servicing the water machines, including the periodic replacement of the machines’
water filters and the collection of cash and other payments from the machines.
23. Water Station contracted with retailers for the right to install Creative-manufactured
water machines in their stores.
24. In exchange, Water Station paid the retailer a percentage of the water machines’
revenues as a commission.
25. Wear negotiated these contracts with retailers, including determining the locations
for the water machines’ placement and the retailers’ commission levels, which generally ranged from
40% to 55% of the machines’ gross profits.
26. Wear signed the contracts with retailers on Water Station’s behalf.
27. Retailers that agreed to place water machines on Water Station’s behalf included
national convenience and grocery store chains, fitness centers, gas stations, and discount retailers.
These retailers agreed to place Water Station water machines at locations across the United States.

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28. Each water machine purportedly had a unique serial number and modem number.
The modem number would report the amount of credit card revenue generated by the machine,
which was processed by a third-party vendor and sent to bank accounts belonging to Water Station.
29. Wear had signatory authority for all Water Station and Creative bank accounts at all
times throughout the Relevant Period.
II. THE RETAIL SCHEME
A. Defendants Offered and Sold Investment Contracts.
30. By at least 2016, Wear began raising money for Water Station and Creative from
retail investors through the issuance of investment contracts tied to Creative’s water machines.
31. Under these investment contracts—the precise terms of which, as described below,
evolved over time—investors paid a fixed price, typically $8,500 per machine though sometimes as
much as $10,000, purportedly to purchase water machines.
32. In addition, investors paid service fees to Water Station to place, install, manage, and
service the water machines.  Water Station deducted these service fees from the machines’ purported
monthly revenues that it paid to the investors.
33. Investors also agreed to pay certain other expenses associated with the placement
and service of the water machines in retail locations out of their machines’ purported monthly
revenues, including a share of the commissions Water Station paid to retailers for hosting their
machines and the cost of replacing water filters for their machines.
34. Under the investment contracts, investors were supposed to receive monthly
payments from Water Station that came from the net profits of their water machines, after fees and
expenses.
35. These profits were to be derived from Water Station’s efforts to place, service, and
manage the water machines in locations across its retailer network.

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1. Defendants Marketed the Water Machine Investments as Securities.
36. Water Station and Creative, through Wear, retained in-house salespeople on
commission to solicit investments in their water machine investment opportunities.
37. Beginning at least in 2019, Wear also engaged third-party marketing firms to solicit
investments in Water Station’s and Creative’s water machines, generally agreeing to pay these firms a
commission of 10% of every dollar they raised for Water Station and Creative.
38. Defendants pitched their water machine investment opportunities as a purely passive
investment, offering steady income derived solely from Water Station’s servicing and management
efforts.  According to Defendants’ marketing materials, investors would own the machines and
collect regular streams of income as Water Station placed and serviced the machines, purportedly in
highly-trafficked retail locations, and collected payments from water sales.
39. In brochures and other marketing materials provided to potential investors,
Defendants described the water machine investment as a “truly passive, turnkey investment” that
was “ideal for the passive investor,” offering potential investors the opportunity to “maintain
current activities without the responsibilities to carry out the day-to-day operations of the business.”
40. Defendants’ marketing materials also touted the water machine investment as tax
advantageous, permitting for immediate deductions and depreciation of the machines that
supposedly enhanced the return on the investment.
41. In some cases, the marketing materials provided to prospective investors guaranteed
that Water Station would buy back the water machines from investors at or near their purchase price
upon the election of the investor, offering investors additional protection against the investment’s
downside risks.
42. When soliciting potential investors, Defendants specifically targeted the veteran
community, coordinating with veterans’ business advocacy groups to publicize the opportunity.

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43. Defendants offered veterans preferred terms of investment, including lower
minimum investments and down payments, higher guaranteed returns, and exclusive financing
options, such as low or no-interest loans provided by Creative repayable over ten years.
44. Defendants also encouraged prospective investors to finance their investments
through debt.  Wear applied for and obtained a listing with the Small Business Administration’s
(“SBA”) Franchise Directory, a listing of all franchises and other brands eligible for SBA financial
assistance.  This listing publicly confirmed the eligibility of investments in Water Station and
Creative’s water machines for SBA loans.
45. To assist investors in accessing SBA financing, Wear offered investors the option of
executing a “franchise agreement” with a Water Station affiliate, WST Franchise Systems LLC
(“WST”), under which WST licensed its business model and trademark to investors for a fee.
46. A franchise agreement was not required for an investment in Defendants’ water
machines, and not all Retail Scheme investors signed one.  Investors who executed franchise
agreements typically did so to obtain eligibility for an SBA loan to finance the investment, as the
provisions governing SBA loans available to finance Water Station investments generally prohibited
loans for securities purchases, but allowed loans for “franchise” opportunities.
47. At least 127 investors obtained approximately $102 million in SBA loans to finance
their investments in the Retail Scheme.
48. Regardless of whether investors executed a franchise agreement, the substance of
their investment in the Retail Scheme was the same:  investors purchased water machines from
Creative in bulk and delegated placement and management of them to Water Station in exchange for
a return based on a share of the machines’ profits

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2. The “Partnership Model” (2016 – 2021)
49. From 2016 through late 2021, Water Station and Creative raised money from Retail
Scheme investors using a “joint venture,” or “franchise” model (together, the “partnership model”),
through which investors executed: (a) a purchase order; (b) a service agreement; and, for franchise
investors, (c) a franchise agreement.
50. The Purchase Order:  Pursuant to the purchase order, investors agreed to pay
Creative a fixed price (usually $8,500 per machine, though sometimes as much as $10,000) to
become the “sole owner and titleholder” of specific machines identified in the purchase order by
their unique serial numbers.
51. The purchase orders did not give investors discretion over the locations of their
water machines, which was generally left to Water Station’s discretion.
52. Wear signed all purchase orders on behalf of Creative.
53. The Service Agreement:  Investors executed a service and management agreement
(“service agreement”) with Water Station at the same time they entered into an order to purchase
water machines from Creative.  Pursuant to the service agreements, Water Station agreed to place
and install investors’ machines at retail locations, to collect cash and credit card payments from the
machines, and to manage “all day-to-day decisions” concerning the purchased machines in return
for a servicing fee typically equal to 20% of the applicable machines’ monthly profits.
54. Until approximately mid-2019, the service agreements provided that investors and
Water Station would split the net profits generated by the investors’ water machines equally, after
Water Station collected its 20% servicing fee and paid out other expenses (which included certain
commissions paid to retailers to place the machines).
55. Beginning in or around mid-2019, Water Station amended the terms of its service
agreements to eliminate the profit-splitting structure for new, and for many existing, Retail Scheme

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investors.  Instead, Water Station guaranteed investors fixed annual returns, which generally ranged
from 12% to 20% of their investment.
56. Water Station also generally promised investors in these service agreements a share
(typically 30%) of any advertising revenues the company received from placing advertisements on
the investors’ water machines.
57. Although early versions of the service agreement provided for payments to investors
based on the profits of their particular machines, all versions of the service agreement informed
investors that Water Station would not segregate water machine revenues by machine, but rather
would commingle machine revenues with the revenues generated by other investors’ machines.
58. Additionally, although the service agreements stated that Water Station was “not
required to maintain separate bank accounts [for] or to otherwise segregate” the water machine
owners’ gross and net machine profits, the service agreements represented that Water Station would
maintain all books and records relating to the water machines and, at least annually, provide
investors with a report showing their particular machines’ gross and net profits, associated costs, as
well as the total distributions Water Station paid them.
59. The service agreements additionally gave Water Station the option (and, in some
cases, the obligation, at the investor’s election) to buy the water machines back from investors at
85% of the cost of the machines within the first three years of the investment, and at 100% of the
cost of the machines thereafter.
60. Wear signed all service agreements on behalf of Water Station.
61. The Franchise Agreement:  Certain investors—i.e. those who financed their water
machine investments through an SBA loan—also executed a franchise agreement with WST, under
which WST licensed its business model and trademark to investors for a fee.   Investors who did not
need or want an SBA loan to finance their investment generally did not execute the franchise

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agreement or pay the franchise fee, but instead invested in water machines by executing the purchase
order and service agreement only.
62. Wear signed all franchise agreements on behalf of WST.
63. At or after the time investors executed the purchase order and service agreement,
either Creative or Water Station, through Wear, provided them with lists of the machines that they
purchased and owned, identifying each machine by its unique serial number and confirming the
location at which each machine was installed (“Machine Lists”).  Wear and Creative typically
appended Machine Lists to investors’ purchase orders, although Water Station (through Wear)
would sometimes send investors Machine Lists after execution of the purchase orders to update
investors on the placement of their machines.
3. The Private Placement Model (Late 2021 – 2023)
64. In or around August 2021, Wear concluded that the purchase orders and service
agreements, collectively, constituted an investment contract and therefore fell within the definition
of “securities” under the federal securities laws.
65. Defendants accordingly began selling the water machine investments pursuant to a
private placement memorandum (“PPM”) that purported to rely on exemptions from registration
under Regulation D (the “private placement model”).
66. Beginning in at least January 2022, Defendants, as well as a registered broker-dealer
they later retained to market the investments, distributed the PPM to prospective investors along
with marketing materials and the purchase orders and service agreements.
67. The PPM described the “security” being sold as an “Investment Contract”
comprised of the purchase order and service agreement, the terms of which remained materially the
same as those used previously under the partnership model with Retail Scheme investors.

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68. The PPM represented that investors would receive a monthly fee based on a fixed
annual rate of return specified in the service agreement (generally between 12% and 15% of the
investment) plus a percentage (generally 30%) of any advertising revenue generated by the investors’
water machines.
69. The PPM stated that “return[s] on the purchase of an Investment Contract will
depend solely on the sales of water from each water [machine] the Investor purchases, and on the
net advertising revenue attributable to each machine.”
70. The PPM also stated that the offering proceeds would be used to finance the
manufacture of the water machines sold under the investment contract, to pay broker fees if
applicable, and to provide a return to Creative’s owners.
71. Wear reviewed and approved the PPM on behalf of Water Station and authorized its
use with potential investors.
72. Investors in the private placement model subscribed by executing a subscription
agreement, in addition to signing the purchase order and service agreement.
73. Apart from the PPM’s acknowledgment that the purchase order and service
agreement constituted a security and the requirement that investors sign a subscription agreement,
investing in water machines under the private placement model was functionally the same as under
the partnership model.
74. As with investors under the partnership model, investors under the private
placement model (a) purchased water machines from Creative, (b) delegated the machines’
placement and maintenance to Water Station, (c) received Machine Lists from Water Station and
Wear identifying the serial number and location for each machine they supposedly purchased, and
(d) received monthly fees purportedly derived from the management efforts of Water Station.

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75. Wear signed all subscription agreements (as well as purchase orders and service
agreements) on behalf of Water Station and Creative under the private placement model.
76. From 2016 through April 2022, Defendants raised over $135 million from
approximately 250 Retail Scheme investors under either the partnership model or the private
placement model.
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77. In so doing, Defendants purported to sell more than 15,000 water machines to
investors.  Defendants represented in purchase orders and Machine Lists that they had placed these
machines at locations in Defendants’ retailer network on these investors’ behalf.
B. Defendants Defrauded Investors in the Retail Scheme.
78. In fact, Defendants neither produced nor installed anywhere near 15,000 water
machines.  The vast majority of the water machines Defendants purported to sell and manage did
not exist at all or were not owned by Creative because they had already been sold to other investors.
79. Indeed, during the Relevant Period, Water Station placed, at most, approximately
2,600 machines at retail locations nationwide, only a fraction of the more than 15,000 water
machines Defendants represented to investors that they had installed and placed in falsified
purchase orders and Machine Lists.
80. Defendants stored approximately 3,000 additional water machines in warehouses,
but many of these machines were only partially built or otherwise inoperable—and, in any event,
virtually none of these warehoused machines were either (a) located where Defendants represented
them in purchase orders and/or Machine Lists to be, or (b) capable of producing revenues to
generate investor distributions as promised.

1
  Defendants raised the nearly the entirety of those investments through the partnership model.  As of
April 2022, only three investors signed subscription agreements, and Water station raised only approximately
$3 million of funds from investors through the private placement model.

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81. Accordingly, Wear’s and Creative’s representations in the purchase orders that
investors would be the sole owners of actual, physical machines placed in the field were, in at least
most cases, false and misleading.
82. In addition to falsely overstating the number of water machines they sold,
Defendants misrepresented the machines’ locations.  For example, according to Machine Lists that
Defendants sent to investors during the Relevant Period, Defendants represented that Water Station
had placed more than 3,800 investor water machines at nationwide locations of Retailer A, a national
discount retail chain.
83. These representations were false because, in fact, Retailer A hosted no more than
120 of Defendants’ water machines during the Relevant Period.
84. Defendants also routinely sold the same water machines to multiple investors.  For
example, Water Station (through Wear) provided a Machine List to an investor (“Investor A”) in
April 2022 identifying by serial number the 71 machines this investor purportedly owned under a
purchase order executed in December 2021.  All but one of the serial numbers on Investor A’s
Machine List also appeared on the Machine List that Defendants sent to a different investor
(“Investor B”), who purportedly purchased these water machines months earlier, in April 2021, and
who never sold or otherwise relinquished title to them.
85. Accordingly, the representations in Investor A’s purchase order that Investor A
would have sole title to the purchased water machines were false.
86. In total, during the Relevant Period, Defendants sold at least 650 water machines
bearing a unique serial number to more than one investor.  Dozens of machine serial numbers were
assigned to at least four investors at once.
87. As the founder, owner, and managing partner of Water Station and Creative, Wear
(a) signed the purchase order and service agreement through which each Retail Scheme investor

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invested in Defendants’ water machines; (b) had access to these entities’ vending management
systems, which showed the number of machines actually placed and installed; (c) negotiated the
placement of machines (and commission rates) with retail locations hosting Defendants’ machines;
and (d) generated, reviewed, and/or disseminated (or facilitated the dissemination of) the Machine
Lists for each investor.
88. Accordingly, Wear knew or recklessly disregarded that Creative was falsely promising
Retail Scheme investors exclusive ownership of water machines that, in reality, were either non-
existent or were already owned by others (or both), and which were not placed at the locations
Defendants represented them to be.
89. After inducing investments through the false representation of ownership of actual,
physical water machines, Wear misappropriated the investment proceeds, including to fund the
operations of his unrelated ventures—diverting tens of millions of dollars’ worth of investor funds
to Refreshing, Ideal, as well as other businesses Wear founded and managed in other industries.
90. Wear also used approximately $800,000 in investor funds to purchase a personal
residence on Camino Island in Washington in July 2020.
91. At least partly because Defendants promised returns on more water machines than
they actually placed, Water Station was unable to generate enough machine revenues to cover Water
Station’s guaranteed monthly distributions to investors.
92. To cover these shortfalls—and to foster the pretense that investors possessed real,
physical, and profitable water machines when they did not—Wear made putative distribution
payments to Water Station’s investors using other sources, including using new investor money to
make payments to existing investors in a Ponzi-like fashion.  For example:

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a. In July 2020, three investors wired approximately $300,000 in new investments to a
Creative bank account.  At Wear’s direction, almost a third of that money was
transferred to pay outstanding investor distributions the same day.
b. Between August 21 and August 24, 2020,  Wear directed the transfer of new investor
funds received over that period to pay over $90,000 in investor distributions.
c. In January 2022, Wear caused approximately $1 million in putative distributions to
be paid to Retail Scheme investors using the proceeds of a loan obtained by Creative.
d. On March 3, 2022, Creative received $340,000 in new investor money.  Wear routed
that money to existing Retail Scheme investors to pay distributions and to fund
Wear’s unrelated businesses within two days of receiving it.
93. Wear directed these (and other) transfers to make payments to investors, and he
therefore knew or recklessly disregarded that he was using new investor money and other sources to
make payments to investors, and not money generated from water machine profits as represented.
94. Even after it became clear, by at least the middle of 2020, that water machine profits
were insufficient to cover investor distributions, and after he had resorted to covering shortfalls
through other means, Wear continued to represent to later investors in service agreements and the
PPM that their distributions would be paid using machine profits.
III. THE NOTE SCHEME
A. Defendants Offered and Sold Water Station Notes to Institutional Investors.
95. By April 2022, Defendants faced significant cash flow shortages, lacking funds from
either new investors or other sources to satisfy their distribution obligations to Retail Scheme
investors.
96. To prolong his scheme, Wear arranged for Water Station to issue Notes to
institutional investors.

20
97. On April 29, 2022, at Wear’s direction, Water Station issued Class A Notes in the
aggregate principal amount of $56.25 million and Class B Notes in the aggregate principal amount of
$15 million under an indenture (“Indenture”), raising a total of approximately $71.25 million.
98. A financial services company focused on community banking (“Institutional Investor
A”) purchased the Class A Notes for $55.7 million.
99. The Class B Notes were purchased by two affiliates of the Jefferies Financial Group
(“Jefferies”), including the 3|5|2 Capital ABS Master Fund, LP (“352 Fund”), a private investment
fund.
100.  Jordan Chirico (“Chirico”), the portfolio manager for the 352 Fund, directed the
purchases of the Class B Notes, with the 352 Fund paying approximately $8.9 million, and another
Jefferies affiliate buying the remainder for approximately $6.1 million.
101. Wear signed the Indenture on behalf of Water Station.
102. In exchange for the Notes proceeds, Water Station pledged 2,794 water machines as
collateral (“Initial Collateral”).  Water Station, at Wear’s direction, provided a list of the 2,794 water
machines pledged as Initial Collateral to a bank appointed to serve as trustee (the “Trustee”) under
the Indenture, identifying each machine by serial number and location (the “Initial Collateral List”).
103.  Going forward, Water Station also agreed under the Indenture to pledge “Eligible
Assets,” defined as newly manufactured water machines or existing machines less than five years old,
to be purchased with the proceeds of the Notes.  These Eligible Assets then became part of the
collateral pool securing the Notes.
104. Wear represented in the Indenture that Water Station “ha[d] good and marketable
title” to the Initial Collateral and Eligible Assets pledged under the Indenture, and that when
transferred to the noteholders, the collateral would be “free and clear of any Encumbrances.”

21
105. Pursuant to the Indenture, Water Station granted a first priority security interest in
the Initial Collateral and all Eligible Assets to the Trustee for the benefit of noteholders.
1. The Indenture’s Restrictions on Defendants’ Use of Notes Proceeds
106. The Indenture placed strict controls over the use of proceeds from the Water Station
Notes offerings and water machine revenues.
107. Under the Indenture, Notes proceeds were to be remitted into a segregated account
with the Trustee (the “Acquisition Account”).
108. With limited exceptions applicable to the initial funding, Water Station was
prohibited from withdrawing funds from the Acquisition Account for any purpose other than to
acquire water machines defined as Eligible Assets.
2

109. To assure that Water Station was using Notes proceeds only for their approved uses,
before Water Station could make a withdrawal from the Acquisition Account, it was required to
submit certain required documentation to the Trustee.
110. The required documentation included:
a. An invoice from Creative evidencing the purchase of new water machines identified
by serial number;
b. A purchase and sale agreement between Water Station and Creative (signed by
Wear on behalf of both parties) in which Creative represented it had title to the
water machines subject to the sale free and clear of any encumbrances and/or
transfer restrictions and that the water machines sold were in good operating
condition and repair.  Bills of sale attached to the purchase and sale agreement

2
  As part of the initial funding, Water Station was authorized to use a portion of the Notes proceeds to
pay certain offering-related expenses, to buy back machines from certain retail investors to contribute to the
Initial Collateral, and to make certain one-time lease payments on warehouses leased from Ideal that were
purportedly used to store water machines.  After payment of these expenses, the remainder (approximately
$38 million) was remitted into the Acquisition Account for the acquisition of Eligible Assets.

22
identified the machines sold to Water Station by serial number and placement
location; and
c. A withdrawal request from Water Station (also typically signed by Wear) in which
Water Station certified that it would use the Notes proceeds “solely to fund the
purchase of Eligible Assets” pursuant to the terms of the Indenture and related
purchase and sale agreements.
111. These documents were subject to review by the “Collateral Manager,” an
independent financial institution appointed under an agreement that was executed
contemporaneously with the Indenture and signed by Wear on behalf of Water Station.
112. The Collateral Manager was required to review and approve each proposed
acquisition of Eligible Assets by Water Station before the Trustee could release funds from the
Acquisition Account.
113. The Indenture imposed additional reporting obligations on Water Station, requiring
it to provide the Collateral Manager and Trustee with monthly sales data for all water machines
securing the Notes, quarterly performance reports, and periodic financial statements.
2. The Indenture’s Restrictions on the Use of Water Machine Revenues
114. The Indenture required that revenues from the water machines pledged to the Notes
as Initial Collateral or Eligible Assets be remitted to a separate segregated account at the Trustee (the
“Collection Account”).
115. The Indenture authorized Water Station to withdraw funds monthly from the
Collection Account to pay commissions to retailers, which typically ranged from 40% to 55% of the
revenues generated by the water machines purportedly placed at their stores.

23
116. Each month, Water Station was required to submit to the Collateral Manager a
report detailing the revenues earned by the water machines serving as collateral for the Notes and
the commissions Water Station owed to the retailers where those machines were placed.
117. Upon review and approval of this report, the Collateral Manager would, per the
Indenture, instruct the Trustee to transfer the amounts owed as commissions from the Collection
Account to a Water Station bank account from which Water Station was to then distribute the
commissions it owed to retailers.
118. Under the Indenture, balances from the Collection Account, net of retailer
commission payments, were used to compensate the Trustee and Collateral Manager and to make
interest and principal payments to noteholders.
B. Defendants Defrauded Investors in the Note Scheme.
1. Defendants Fraudulently Misappropriated and Diverted Notes
Proceeds from the Acquisition Account.
119. Defendants induced investments in the Notes on fraudulent pretenses and
misappropriated millions of dollars of Notes proceeds through numerous deceptions and false
representations.
120. The Initial Collateral List identifying the water machines that Wear, on behalf of
Water Station purported to have pledged to secure the Notes contained hundreds of machines that
did not exist, that were already owned by Retail Scheme investors, and/or were not in the locations
identified.
121. Water Station’s representation in the Indenture that Water Station had “good and
marketable title” to the water machines included on the Initial Collateral List—and that such assets
were “free and clear” of any encumbrances—was therefore false.
122. Wear’s and Water Station’s representation in the Indenture that they would use
Notes proceeds exclusively to acquire Eligible Assets—that is, water machines—was also false.

24
123. For example, on May 19, 2022, just three weeks after the first Notes offering closed,
Wear submitted Water Station’s very first withdrawal request to the Trustee, seeking approximately
$480,000 from the Acquisition Account.
124. Wear represented to the Trustee in the request that “the funds so withdrawn will be
used solely to fund the purchase of Eligible Assets,” and attached an invoice and purchase and sale
agreement that supposedly identified by serial number the 58 new water machines to be acquired
with the requested funds.
125. This representation was false.
126. As Wear acknowledged in an email to Water Station’s financial controller on May 20,
2022, Water Station needed “all of the bond draw for partner payments.”  In other words, Water
Station needed all of the Notes proceeds he was withdrawing for payments to Retail Scheme
investors.
127. Consistent with this email, and contrary to his representation to the Trustee, Wear
used the approximately $480,000 from the Acquisition Account to pay distributions to investors in
the Retail Scheme and not to purchase new water machines as required.
128. Additionally, the invoice and purchase and sale agreement attached to Wear’s May
19, 2022, withdrawal request were fabricated, representing water machine sales that never, in fact,
occurred.
129. Wear’s subsequent requests to withdraw funds from the Acquisition Account
followed a similar pattern.
130. From May 2022 through November 2022, Water Station, through Wear, submitted
nineteen withdrawal notices to the Trustee, each representing that the funds withdrawn would be
used “solely” to fund the purchase of Eligible Assets.  In aggregate, these requests, and their
supporting invoices and purchase and sale agreements, purported to evidence that Water Station had

25
used the Notes proceeds to acquire more than 4,000 new water machines from Creative, and to buy
back more than 750 machines from investors in the Retail Scheme, which Water Station then
pledged to the Trustee as collateral for the Notes.
131. By the end of November 2022, Water Station had fully drawn down the
approximately $38 million initial funding of the Acquisition Account under the Indenture.
132. On January 23, 2023, Water Station issued approximately $25 million of additional
Class A and B Notes under a supplemental Indenture (the “First Supplemental Indenture”), bringing
the total amounts raised through the Notes offering to nearly $100 million.
133. The Notes issued under the First Supplemental Indenture were subject to the same
restrictions and reporting requirements the initial Indenture placed upon Water Station’s
withdrawals of both the Notes proceeds from the Acquisition Account and retail commission
payments from the Collection Account.  As with the initial Indenture, Water Station could only use
Notes proceeds to purchase Eligible Assets, and Water Station represented that it had “good and
marketable title” to any Eligible Assets it pledged under the Indenture and that when transferred to
the noteholders, such collateral would be “free and clear of any Encumbrances.”
134. Between February 2 and April 25, 2023, Water Station, through Wear, submitted six
withdrawal notices to the Trustee, each representing that the funds withdrawn would be used
“solely” to fund the purchase of Eligible Assets.  These notices and their supporting documentation
purported to evidence that Water Station had used the Notes proceeds to acquire an additional
approximately 2,850 new water machines from Creative as Eligible Assets that Water Station then
pledged to the Trustee.
135. By April 2023, Water Station had fully withdrawn the Notes proceeds raised under
the First Supplemental Indenture.

26
136. In total, by April 2023, under the Indenture and First Supplemental Indenture, Water
Station withdrew approximately $63.6 million in Notes proceeds from the Acquisition Account, and
purported to pledge 10,464 water machines (including the Initial Collateral) to the Trustee as
collateral to secure the Notes.
137. The 10,464 water machines that Water Station supposedly acquired and installed at
retailers and to have pledged as security for the Notes exceeded the number of machines that
Creative had ever manufactured, much less placed in the field.
138. In actuality, most of the water machines Wear and Water Station claimed to have
purchased with Notes proceeds either did not exist or had already been sold to Retail Scheme
investors (and were not repurchased using these Notes proceeds).
139. Wear’s representations in the withdrawal requests described in paragraphs 130 and
134 that the withdrawn funds would be used solely to fund the purchase of Eligible Assets were,
accordingly, false.
140. At Wear’s direction, Water Station fabricated the invoices and purchase and sale
agreements that it submitted with these withdrawal requests to reflect sales from Creative to Water
Station of fictitious water machines and/or water machines that Creative did not own.
141. Wear and Water Station also routinely generated and submitted falsified financial
reports, including sales and performance reports, to the Collateral Manager and the Trustee.
142. These reports falsely vouched for the existence of non-existent water machines,
falsified the locations at which these machines were purportedly installed and placed, and fabricated
the revenues that these machines generated.
143. For example, at Wear’s direction, Water Station represented to the Collateral
Manager in withdrawal requests and in sales and performance reports that, as of April 2023, Water
Station had placed 3,367 of the 10,464 water machines supposedly securing the Notes with Retailer

27
A, a retailer that (as detailed above) had in fact hosted no more than 120 machines across its stores
during the Relevant Period.
144. Water Station also represented in these reports that, as of April 2023, Water Station
had placed an additional 4,099 machines across three other retailers (Retailers B, C, and D), none of
which hosted a single Water Station water machine at any location during the Relevant Period.
145. In total, Wear reported in invoices, purchase sales and sales agreements, and other
sales data and performance reports, that Water Station had placed at least 70% of the water
machines purportedly securing the Notes with retailers that, in actuality, had no (or only nominal)
business with Water Sation, as reflected in the below chart:
Retailer Eligible Assets Reportedly Placed at
Retailer
Eligible Assets Actually Placed at
Retailer
Retailer A 3,367 112
Retailer B 442 0
Retailer C 718 0
Retailer D 2,939 0
Total 7,466 (out of 10,464 machines) 112

146. Contrary to Wear and Water Station’s representations that Water Station would use
funds withdrawn from the Acquisition Account solely to buy water machines, Wear and Water
Station then misappropriated and diverted these funds unauthorized purposes.
147. Of the $63.6 million Water Station withdrew from the Acquisition Account between
May 2022 and April 2023, Defendants misappropriated and siphoned more than $59 million for
purposes other than purchasing water machines—including using (a) more than $15 million to pay
distributions to Retail Scheme investors; (b) more than $10 million to fund the operations of Wear’s
other businesses, including Refreshing and Ideal; and (c) approximately $5 million to fund the
Collection Account in order to cover interest payments due to the same holders of the Notes whose
investments had funded the Acquisition Account.

28
2. Defendants Fraudulently Misappropriated and Diverted Notes
Proceeds from the Collection Account.
148. At Wear’s direction, Water Station routinely provided revenue reports to the
Collateral Manager that materially overstated the amount of revenues generated by the water
machines Water Station had actually placed at retail locations.
149. In turn, because retailer commissions were based on a percentage of this reported
revenue, these inflated revenue figures had the effect of falsely inflating the amount of commissions
Wear reported being required to pay to retailers.
150. Providing inflated revenue and commission figures to the Collateral Manager and
Trustee allowed Wear to access funds from the Collection Account that, based on the actual, lower
commission totals, he would not have been able to access.
151. For example, Wear approved the submission of sales reports and other data to the
Collateral Manager representing that, between May 2022 and December 2023, the more-than 3,200
machines purportedly placed at Retailer A had generated approximately $6.5 million in customer
revenues over the period, resulting in corresponding commission payments due to Retailer A of
about $3.15 million.
152. Upon review and approval of the Collateral Manager, the Trustee disbursed this
$3.15 million from the Collection Account to a Water Station bank account to allow Water Station
to make its claimed commission payments to Retailer A.
153. But, as reflected in Water Station’s internal sales and commission reports, over the
May 2022 to December 2023 period, Water Station only actually placed about 112 water machines at
Retailer A stores, and those machines generated only about $150,000 in customer revenues.
154. The commissions Water Station actually paid to Retailer A between May 2022 and
December 2023 totaled only about $60,000.

29
155. Wear misappropriated and diverted the difference between the $3.15 million in
commission amounts he falsely told the Collateral Manager and Trustee he paid Retailer A and the
$60,000 he actually paid Retailer A in commissions.
156. By similarly overstating the purported commissions paid to other retailers,
Defendants were able to misappropriate or otherwise divert a total of at least $5 million from the
Collection Account during the Relevant Period.
3. Defendants Made Deposits into the Collection Account to Conceal
Their Fraud.
157. Had Defendants deposited only actual water machine revenues into the Collection
Account, the resulting deficit would have exposed the falsity of the invoices, purchase and sale
agreements and collateral reports Defendants had been submitting to the Collateral Manager and
Trustee.
158. To avoid detection of their fraud and to maintain the illusion that the thousands of
fictitious water machines Defendants claimed to have placed were real, Wear directed funds into the
Collection Account from other sources to create the appearance that these fictitious machines were
generating revenue.
159. For example, Wear directed funds into the Collection Account from: (a) new
investments in the Retail Scheme (including Investor C, described below at paragraphs 161 to 172),
(b) revenues from other types of vending machines (i.e., not water machines) owned by Refreshing;
and (c) funds that Wear misappropriated from the Acquisition Account.
160. In sales reports provided to the Collateral Manager, Wear falsely classified these
other sources of funds as water machine revenues, bolstering the fiction that the Notes were
collateralized with thousands of revenue-generating water machines in the field when, in reality, both
the number of the machines and the revenues they generated were substantially overstated.

30
IV. DEFENDANTS FRAUDULENTLY INDUCED AN INVESTMENT FROM
INVESTOR C.
161. Defendants’ successful closing of the first Notes offering in April 2022 allowed Wear
to present Water Station and Creative as well-capitalized and positioned for growth, enabling Wear
to generate additional demand from investors and to recruit new victims for the Retail Scheme.
162. In November 2022, between Water Station’s first and second Notes issuances,
Defendants secured its largest ever investment in the Retail Scheme by inducing Investor C, a
private company focused on investing in water-related businesses, to enter into a purchase and sale
agreement for water machines to be serviced and managed by Water Station.
163. Pursuant to a November 2022 master purchase agreement, and several supplemental
purchase and sale agreements executed through January 2023, Investor C invested $32.2 million in
Water Station.
164. In exchange for that investment, Water Station purported to sell Investor C 3,427
water machines, which Water Station allegedly had acquired from existing investors in the Retail
Scheme who purportedly had agreed to sell their water machines back to Water Station.
165. Under a corresponding service agreement, Water Station agreed to place, manage,
and service Investor C’s water machines.  The service agreement promised Investor C a fixed
annualized return of 12%.
166. Wear signed each of the purchase and sale agreements and the service agreements
related to the sales of water machines to Investor C.
167. In these agreements, Wear identified by serial number and location each of the water
machines Water Station purportedly purchased from investors in the Retail Scheme on Investor C’s
behalf.

31
168. Wear also represented in these agreements that the water machines Water Station
purchased on Investor C’s behalf were in good and operable condition, and that Investor C would
have exclusive title to them.
169. These representations were false.
170. Wear did not, as represented, enter into agreements to buy back over 3,000 water
machines from existing investors in the Retail Scheme on Water Station’s behalf for resale to
Investor C.  Rather, at Wear’s direction, Water Station provided Investor C a list of water machines
that did not exist and/or were pledged or sold to other investors.
171. As Wear knew or recklessly disregarded by virtue of his role as signatory to the
Indenture, Indenture supplements, and withdrawal requests pledging water machines as collateral to
the Trustee, at least 2,000 of the water machines that Defendants purported to sell to Investor C had
already been pledged as collateral to the Note Scheme, including approximately 600 machines that
were purportedly placed at Retailer A but did not actually exist.
172. Rather than use Investor C’s $32.2 million to acquire water machines from existing
investors as promised, Wear directed that at least $13.7 million of the investment be routed to bank
accounts belonging to Defendants to (a) pay outstanding distributions to earlier investors in the
Retail Scheme; (b) fund the Collection Account to create the false appearance that the Eligible
Assets were generating revenue in-line with what Defendants’ fabricated collateral reports had
represented; and (c) make payments on commercial loans related to Wear’s other, unrelated business
interests.

32
V. RELIEF DEFENDANTS WERE UNJUSTLY ENRICHED.
173. During the Relevant Period and throughout the period in which their fraudulent
Retail and Note Schemes were ongoing, Defendants paid more than $47 million to Refreshing
($41.5 million) and Ideal ($6.2 million).
174. Refreshing did not provide consideration justifying its receipt of this $41.5 million.
175. Ideal did not provide consideration justifying its receipt of this $6.2 million.
VI. DEFENDANTS’ FRAUDULENT SCHEMES UNRAVEL.
176. By April 2023, with no new investments coming in, and having completely exhausted
both the initial proceeds from the Note Scheme and the funding from Investor C, Defendants
stopped making guaranteed monthly distributions to investors in the Retail Scheme.
177. Over the summer of 2023, the Collateral Manager began to question the accuracy of
the data reported by Water Station in its invoices, purchase and sale agreements, and sales and
performance reports.
178. In or around August 2023, the Collateral Manager commissioned a third-party to
perform spot checks of locations that Water Station had represented to have placed water machines
that were supposedly collateralizing the Notes.
179. This third-party firm reported to the Collateral Manager that 163 of the 164 locations
it visited had no Water Station water machines on site.
180. The Collateral Manager, in turn, relayed this finding to Wear by email on August 11,
2023 and sought an explanation for the discrepancy.
181. On August 16, 2023, the Collateral Manager informed Wear by email that Water
Station had 90 days (a “Cure Period”) per the terms of the Indenture to provide information

33
verifying the existence and the location of “3000+ machines” ostensibly securing the Notes that the
Collateral Manager determined were “actually missing.”
3

182. The Cure Period expired in November 2023 without Wear providing sufficient
information to substantiate the existence of the machines the Collateral Manager identified.  During
this period, Wear also cut off the Collateral Manager’s access to Water Station’s vending
management system, preventing the Collateral Manager from viewing real-time evidence of Water
Station’s purported water machine operations and performance.
183. In December 2023, the 352 Fund (and a Jefferies affiliate) bought out the Class A
Notes held by Institutional Investor A at a discount, leaving the 352 Fund as the primary holder of
all classes of the Notes.
184. Also in December 2023, after months of not receiving its guaranteed distribution
payments, Investor C filed an arbitration claim against Defendants and other Wear entities, alleging,
among other things, that the water machines Investor C purportedly purchased were not free and
clear of prior liens and claims, were not present at the locations they had represented them to be,
and may not have existed at all.
185. Over the course of the end of 2023 and into 2024, numerous other victims of the
Retail Scheme initiated lawsuits against Defendants due to their failure to make promised
distribution payments, with many of these suits accusing Wear of operating a Ponzi scheme.
186. In January 2024, Chirico requested that Water Station’s director of equipment
services provide him directly with a report from Water Station’s vending management system listing
all operable water machines placed in retailer locations.  The report showed that Water Station had

3
  Under the Indenture, if any water machines securing the Notes were discovered to require
maintenance or repairs (i.e. were non-operational), Water Station had 90 days to demonstrate that it had
performed all necessary repairs, or else would be required to refund to the Collections Account all cash used
to purchase such machines.

34
only 2,342 machines placed in the field at retailer locations, far less than the more than 10,000
machines purportedly securing the Notes that Water Station had reported through its Initial
Collateral List, invoices, and purchase and sale agreements.
187. On January 29, 2024, Wear participated in a recorded call with Chirico and
Individual A, a mutual friend of Chirico and Wear’s who had extensive business dealings with Wear
and Water Station, including as one of Water Station’s earliest partnership model investors.
188. During the call, Chirico asked Wear if a substantial portion of the collateral for the
Notes were actually vending machines, rather than water machines.  Individual A raised the
possibility that a large portion of the water machines did not exist at all.
189. Wear did not deny the allegations and provided no explanation as to the existence or
the whereabouts of the missing water machines.  Wear acknowledged that he did not know where
the relevant water machines were and suggested instead that he would look for alternative funding
sources to repay Water Station’s investors.
190. On the call, Individual A accused Wear of running “the largest franchise fraud in the
history of the United States.”
191. The 352 Fund and Water Station entered into another supplemental Indenture on
February 2, 2024, under which Water Station sold the 352 Fund an additional approximately $16.7
million worth of Notes, bringing the total raised through Water Station’s note offering to
approximately $111 million.
192. In May and June, 2024, the Trustee issued notices of default to Water Station under
the Indenture.
193. In May 2024, Creative was placed into receivership through the Receivership Action.
194. In August 2024, the order appointing the receiver in the Receivership Action was
amended to place Water Station (as well as Refreshing) into the receivership, at which time Wear

35
was removed from his role as managing partner of Water Station and Creative and divested of any
management authority with respect to them.
195. In August 2024, creditors filed involuntary Chapter 11 bankruptcy proceedings
against Water Station and Creative.
196. In April 2025, counsel for the estates of Water Station and Creative in their pending
bankruptcy proceeding filed a preliminary accounting listing water machines placed in retail locations
as of October 2024, the last date for which Water Station’s and Creative’s vending management
system had data.
197. That list reported that only 2,107 water machines had been placed in retail locations
as of October 2024.  Many of the machines included on the list were claimed by multiple creditors
because Defendants frequently sold the same machine to more than one investor.
198. Counsel to Creative’s and Water Station’s estate in bankruptcy additionally identified
approximately 2,700 water machines inventoried in warehouses across various states—many of
which were only partially built or otherwise inoperable, and many of which likewise were claimed by
multiple creditors.
FIRST CLAIM FOR RELIEF
Violations of Securities Act Section 17(a)
(All Defendants)

199. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 198.
200. Defendants, directly or indirectly, singly or in concert, in the offer or sale of
securities and by the use of the means or instruments of transportation or communication in
interstate commerce or the mails, (1) knowingly or recklessly have employed one or more devices,
schemes or artifices to defraud, (2) knowingly, recklessly, or negligently have obtained money or
property by means of one or more untrue statements of a material fact or omissions of a material

36
fact necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading, and/or (3) knowingly, recklessly, or negligently have engaged in one or
more transactions, practices, or courses of business which operated or would operate as a fraud or
deceit upon the purchaser.
201. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert,
have violated and, unless enjoined, will again violate Securities Act Section 17(a) [15 U.S.C. § 77q(a)].
SECOND CLAIM FOR RELIEF
Violations of Exchange Act Section 10(b) and Rule 10b-5 Thereunder
(All Defendants)

202. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 198.
203. Defendants, directly or indirectly, singly or in concert, in connection with the
purchase or sale of securities and by the use of means or instrumentalities of interstate commerce, or
the mails, or the facilities of a national securities exchange, knowingly or recklessly have (i) employed
one or more devices, schemes, or artifices to defraud, (ii) made one or more untrue statements of a
material fact or omitted to state one or more material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading, and/or
(iii) engaged in one or more acts, practices, or courses of business which operated or would operate
as a fraud or deceit upon other persons.
204. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert,
have violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C. § 78j(b)]
and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

37
THIRD CLAIM FOR RELIEF
Control Person Liability for Violations of Exchange Act Section 10(b) and Rule 10b-5
(Wear)
205. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 198.
206. As alleged above, Water Station and Creative violated Exchange Act Section 10(b)
[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
207. At all relevant times, Wear controlled Water Station and Creative and was a culpable
participant in Water Station and Creative’s violations of Exchange Act Section 10(b) [15 U.S.C.
§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
208. By reason of the foregoing, Wear is liable as a controlling person pursuant to
Exchange Act Section 20(a) [15 U.S.C. § 78t(a)] for Water Station’s and Creative’s violations of
Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
FOURTH CLAIM FOR RELIEF
Unjust Enrichment
(Relief Defendants)

209. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 198.
210. As described above in Paragraphs 173 to 175, Refreshing and Ideal received
approximately $41.5 million and $6.2 million, respectively, in investor proceeds raised through the
Retail and Note Schemes.
211. Relief Defendants have no legitimate claim to these ill-gotten gains.
212. Relief Defendants obtained the funds under circumstances in which it is not just,
equitable, or conscionable for her to retain the funds.
213. Relief Defendants have therefore been unjustly enriched.

38
PRAYER FOR RELIEF
 WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
I.
Permanently enjoining Defendants and their agents, servants, employees and attorneys and
all persons in active concert or participation with any of them from violating, directly or indirectly,
Securities Act Section 17(a) [15 U.S.C. § 77q(a)] and Exchange Act Section 10(b) [15 U.S.C. § 78j(b)]
and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5(b)].
II.
Ordering Defendants to disgorge all ill-gotten gains they received directly or indirectly, with
pre-judgment interest thereon, as a result of the alleged violations, pursuant to Exchange Act
Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)];
III.
Ordering Defendants to pay civil monetary penalties under Securities Act Section 20(d)
[15 U.S.C. § 77t(d)] and Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3];
IV.
Ordering Relief Defendants to disgorge, with prejudgment interest, all ill-gotten gains by
which they were unjustly enriched, pursuant to Exchange Act Sections 21(d)(3), 21(d)(5), and
21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)];
V.
Permanently prohibiting Wear from serving as an officer or director of any company that
has a class of securities registered under Exchange Act Section 12 [15 U.S.C. § 78l] or that is
required to file reports under Exchange Act Section 15(d) [15 U.S.C. § 78o(d)], pursuant to

39
Securities Act Section 20(e) [15 U.S.C. § 77t(e)] and Exchange Act Section 21(d)(2) [15 U.S.C.
§ 78u(d)(2)];
VI.
Permanently enjoining Wear from, directly or indirectly (including, but not limited to,
through any entity owned or controlled by Wear) participating in the issuance, purchase, offer or
sale of any security, provided, however, that such injunction shall not prevent Wear from purchasing
or selling securities for his own personal account; and
VII.
Granting any other and further relief this Court may deem just and proper.
JURY DEMAND
 The Commission demands a trial by jury.

Dated:  New York, New York
August 14, 2025
_/s/ David Zetlin-Jones____________________
Lee A. Greenwood
David Zetlin-Jones
Heather L. Shaffer
Ming Ming Yang
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
100 Pearl Street
Suite 20-100
New York, NY 10004-2616
(212) 336-0978 (Zetlin-Jones)
[email protected]

Lee A. Greenwood 
David Zetlin-Jones 
Heather L. Shaffer 
Ming Ming Yang 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
100 Pearl Street  
Suite 20-100 
New York, NY 10004-2616 
(212) 336-0978 (Zetlin-Jones) 
[email protected] 
 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

 
SECURITIES AND EXCHANGE 
COMMISSION, 
 
                                             Plaintiff, 
 
                        -against- 
 
RYAN R. WEAR,  WATER STATION 
MANAGEMENT LLC, and CREATIVE 
TECHNOLOGIES, INC.,    
  
                                             Defendants,  
 
                         -and- 
 
REFRESHING USA, LLC, and IDEAL 
PROPERTY INVESTMENTS LLC, 
 
                                             Relief Defendants. 
 
 

 
 
COMPLAINT 

   
25 Civ. 6713 (       ) 

 
   

JURY TRIAL DEMANDED 
  

           
          

 
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against 

Defendants Ryan R. Wear (“Wear”), Water Station Management LLC (“Water Station”) and 

Creative Technologies, Inc. (“Creative”) (collectively, “Defendants”) and Relief Defendants 

Refreshing USA, LLC (“Refreshing”) and Ideal Property Investments LLC (“Ideal”) (together, 

“Relief Defendants”), alleges as follows: 

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SUMMARY 

1. From at least September 2016 through February 2024 (the “Relevant Period”), 

Defendants raised at least $275 million through the fraudulent offering and sale of securities backed 

by water vending machines (“water machines”).  Wear founded and controlled the companies that 

purportedly manufactured and serviced the machines:  Creative and Water Station, respectively.   

2. Wear effected his fraud by orchestrating two inter-related Ponzi-like schemes, 

through which Defendants misappropriated or otherwise diverted tens of millions of dollars in 

investment proceeds to pay distributions to earlier investors and to fund Wear’s unrelated business 

ventures.  

3. Beginning by at least September 2016, Defendants’ first scheme (the “Retail 

Scheme”) involved offering and selling investment contracts primarily to retail investors including 

veterans.  As part of this scheme, Defendants solicited investors to purchase specifically identified 

water machines from Creative, documented in a purchase order.  Water Station agreed to service the 

investors’ machines pursuant to an agreement executed at the same time as the purchase order.  

Defendants lured investors by touting the prospect and, in some cases, the supposed guarantee, of 

lucrative returns, typically ranging between at least 12% and 20% annually.  These returns were 

ostensibly generated from the water machines’ vending revenues, as derived from Water Station’s 

placement and maintenance of the machines in various retail locations.  From approximately 

September 2016 to September 2023, the Retail Scheme raised in excess of $165 million through the 

putative sale of more than 15,000 water machines to approximately 250 investors. 

4. But in reality, most of the more-than 15,000 water machines Defendants purported 

to sell to investors either did not exist or were previously pledged to other investors.  Defendants’ 

representations to investors that they would earn steady returns from the revenues their machines 

generated were also false.  Instead, Wear misappropriated his victims’ investments to fund unrelated 

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businesses, including Refreshing and Ideal, and diverted them to make payments to earlier investors 

in a Ponzi-like manner. 

5. In approximately April 2022, as Defendants struggled to raise new investor money to 

sustain the Retail Scheme, Defendants commenced their second scheme (the “Note Scheme”), 

which targeted institutional investors.  Pursuant to the Note Scheme, Water Station raised more than 

$110 million between April 2022 and February 2024 through the issuance of notes purportedly 

secured by Defendants’ water machines (“Notes”).  Water Station procured these investments based 

on Wear’s false representation that Water Station would use proceeds of the Notes exclusively to 

purchase new water machines from Creative and existing water machines from Retail Scheme 

investors, which would generate revenues to pay the Note Scheme investors their promised interest. 

6. As with the Retail Scheme, most of the water machines Water Station purported to 

pledge as collateral for the Notes did not exist or were not owned by Water Station.  In furtherance 

of the Note Scheme, Wear directed the submission of fabricated invoices, purchase orders, and 

other financial reports to the trustee bank for the Notes to support the illusion that Water Station 

was acquiring or had acquired more than 10,000 water machines to secure the Notes, and to deceive 

the trustee bank into releasing the Notes proceeds to fund those purchases.  In fact, Defendants 

misappropriated or otherwise diverted approximately $60 million from the Notes proceeds for 

unauthorized purposes, including to fund Refreshing and Ideal, to make payments to Retail Scheme 

investors, and even to pay Note Scheme investors their required interest payments with their own 

money.  

7. In approximately mid-2023, Defendants’ scam began to come to light when a 

financial firm tasked with independently monitoring the performance of the water machines 

purportedly backing the Notes identified significant discrepancies between the water machines Wear 

claimed were securing the Notes and the water machines actually generating revenues in the field.  

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Wear was unable to explain these discrepancies, leading one Water Station insider (and early Retail 

Scheme investor) to conclude that Wear was running “the largest franchise fraud in the history of 

the United States.”     

8. By mid-2024, Defendants had run out of money to sustain their fraud, and, in 

August 2024, Water Station and Creative were placed into receivership and involuntary bankruptcy 

proceedings, resulting in Wear’s removal from his position as managing partner at both companies.  

To date, most Retail Scheme and Note Scheme investor victims have not recovered their 

investments.    

VIOLATIONS 

9. By virtue of the foregoing conduct and as alleged further herein: (a) Defendants 

Wear, Water Station, and Creative violated Section 17(a) of the Securities Act of 1933 (“Securities 

Act”) [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange 

Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; and (b) Defendant 

Wear, as a control person of Water Station and Creative under Exchange Act Section 20(a) [15 

U.S.C. §78t(a)], is liable for Water Station’s and Creative’s violations of Exchange Act Section 10(b) 

and Rule 10b-5 thereunder. 

10. Unless Defendants are restrained and enjoined, they will engage in the acts, practices, 

transactions, and courses of business set forth in this Complaint or in acts, practices, transactions, 

and courses of business of similar type and object.   

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

11. The Commission brings this action pursuant to the authority conferred upon it by 

Securities Act Sections 20(b) and 20(d) [15 U.S.C. §§ 77t(b) and 77t(d)] and Exchange Act Section 

21(d) [15 U.S.C. § 78u(d)].  

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12. The Commission seeks a final judgment: (a) permanently enjoining Defendants from 

violating the federal securities laws and rules this Complaint alleges they have violated; (b) ordering 

Defendants to disgorge all ill-gotten gains they received as a result of the violations alleged here and 

to pay prejudgment interest thereon, pursuant to Exchange Act Sections 21(d)(3), 21(d)(5), and 

21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (c) ordering Defendants to pay civil 

money penalties pursuant to Securities Act Section 20(d) [15 U.S.C. § 77t(d)] and Exchange Act 

Section 21(d)(3) [15 U.S.C. § 78u(d)(3)]; (d) ordering Relief Defendants to disgorge, with 

prejudgment interest, all ill-gotten gains by which they were unjustly enriched, pursuant to Exchange 

Act Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (e) 

permanently prohibiting Wear from serving as an officer or director of any company that has a class 

of securities registered under Exchange Act Section 12 [15 U.S.C. § 78l] or that is required to file 

reports under Exchange Act Section 15(d) [15 U.S.C. § 78o(d)], pursuant to Securities Act Section 

20(e) [15 U.S.C. § 77t(e)] and Exchange Act Section 21(d)(2) [15 U.S.C. § 78u(d)(2)]; (f) permanently 

enjoining Wear from, directly or indirectly (including, but not limited to, through any entity owned 

or controlled by Wear) participating in the issuance, purchase, offer, or sale of any security, 

provided, however, that such injunction shall not prevent Wear from purchasing or selling securities 

for his own personal account; and (g) ordering any other and further relief the Court may deem just 

and proper.  

JURISDICTION AND VENUE 

13. This Court has jurisdiction over this action pursuant to Securities Act Section 22(a) 

[15 U.S.C. § 77v(a)] and Exchange Act Section 27 [15 U.S.C. § 78aa].  

14. Defendants, directly and indirectly, have made use of the means or instrumentalities 

of interstate commerce or of the mails in connection with the transactions, acts, practices, and 

courses of business alleged herein. 

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15. Venue lies in this District under Securities Act Section 22(a) [15 U.S.C. § 77v(a)] and  

Exchange Act Section 27 [15 U.S.C. § 78aa].  Certain of  the acts, practices, transactions, and courses 

of  business alleged in this Complaint occurred within this District.  Among other things, 

Defendants offered and sold securities purportedly backed by water machines to Note Scheme 

investors whose principal place of  business was in New York County, and who executed the relevant 

transaction documents to acquire the Water Station Notes in this District.  

DEFENDANTS 

16. Wear, age 49, is a resident of Marysville, Washington.  Wear is the founder and 

owner and, until August 2024, was the managing partner of Water Station, Creative, Refreshing, and 

Ideal.  Wear also owns and controls dozens of other limited liability companies. 

17. Water Station is a Washington limited liability company formed by Wear in 2016 

and wholly-owned and controlled by him throughout the Relevant Period.  Water Station placed, 

installed, operated, and serviced water machines, which were generally manufactured or sourced by 

Creative.  In August 2024, Water Station was put into receivership through a private litigation in 

Washington state court, captioned First Fed Bank v. Creative Technologies, LLC, Case No. 24-2-10753-3 

SEA (Wa. Super. Ct.) (filed May 14, 2024) (the “Receivership Action”).  Later that month, a creditor 

of Water Station filed an involuntary Chapter 11 bankruptcy petition against it, captioned Water 

Station Management LLC, No. 24-bk-1864 (Bankr. E.D. Wa.) (filed Aug. 27, 2024) (transferred from 

Bankr. S.D. Tex.).  Water Station is now managed by an independent chief restructuring officer, who 

also manages Creative and Refreshing.   

18. Creative is a Washington limited liability company formed by Wear in 2013.  

Throughout the Relevant Period, Creative was controlled and majority-owned by Wear.  Creative 

manufactured, sourced, and sold water machines that Water Station placed and serviced around the 

country.  In May 2024, Creative was put into receivership through the Receivership Action.  In 

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August 2024, a creditor filed an involuntary Chapter 11 bankruptcy petition against Creative, 

captioned Creative Technologies, LLC, No. 24-bk-1866 (Bankr. E.D. Wa.) (filed Aug. 27, 2024) 

(transferred from Bankr. S. D. Tex.).  Creative is now managed by an independent chief 

restructuring officer.  

RELIEF DEFENDANTS 

19. Refreshing is a Washington limited liability company formed by Wear in 2020.  

Throughout the Relevant Period, Refreshing was controlled and majority-owned by Wear.  

Refreshing, through its subsidiaries, operated retail vending machines that sold refreshments and 

snacks.  Refreshing was put into receivership through the Receivership Action in August 2024.  

Later the same month, a creditor filed an involuntary Chapter 11 bankruptcy against Refreshing, 

captioned Refreshing USA, LLC, No. 24-bk-1863 (Bankr. E.D. Wash.) (filed Aug. 27, 2024) 

(transferred from Bankr. S.D. Tex.).  Refreshing is now managed by an independent chief 

restructuring officer. 

20. Ideal is a Washington limited liability company formed by Wear in 2019.  

Throughout the Relevant Period, Ideal was majority-owned and controlled by Wear.  Ideal owned 

commercial and residential real estate across the United States, including warehouses in which water 

machines and vending machines were purportedly stored.  In the spring of 2024, Ideal was put into 

receivership through a private litigation in First Fed Bank v. Ideal Property Investments, No. 24-2-08418-5 

(Wa. Super Ct.) (filed Apr. 14, 2024).  In September 2024, Ideal commenced Chapter 11 bankruptcy 

proceedings captioned Ideal Property Investments LLC, No. 24-bk-1421 (Bankr. E.D. Wa.) (filed Sept. 

5, 2024).  Ideal is now managed by an independent chief restructuring officer. 

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FACTS 

I. WEAR FORMS CREATIVE AND WATER STATION TO DEVELOP AND 
MONETIZE WATER MACHINES. 

A. Background on Wear’s Water Machine Business Model 

21. Wear formed Creative in 2013 to develop, manufacture, and sell water machines.  

Creative’s water machines filtered water from a local source, allowing customers to purchase gallon-

size containers of filtered water using cash or a credit card.  

22. Wear formed Water Station in 2016 to place, install, service, and operate Creative’s 

water machines.  Water Station identified and facilitated the placement of Creative’s water machines 

at available retail locations around the United States.  Water Station was also responsible for 

installing and servicing the water machines, including the periodic replacement of the machines’ 

water filters and the collection of cash and other payments from the machines.   

23. Water Station contracted with retailers for the right to install Creative-manufactured 

water machines in their stores.   

24. In exchange, Water Station paid the retailer a percentage of the water machines’ 

revenues as a commission.   

25. Wear negotiated these contracts with retailers, including determining the locations 

for the water machines’ placement and the retailers’ commission levels, which generally ranged from 

40% to 55% of the machines’ gross profits. 

26. Wear signed the contracts with retailers on Water Station’s behalf.    

27. Retailers that agreed to place water machines on Water Station’s behalf included 

national convenience and grocery store chains, fitness centers, gas stations, and discount retailers.  

These retailers agreed to place Water Station water machines at locations across the United States.  

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28. Each water machine purportedly had a unique serial number and modem number.  

The modem number would report the amount of credit card revenue generated by the machine, 

which was processed by a third-party vendor and sent to bank accounts belonging to Water Station.   

29. Wear had signatory authority for all Water Station and Creative bank accounts at all 

times throughout the Relevant Period. 

II. THE RETAIL SCHEME 

A. Defendants Offered and Sold Investment Contracts.  

30. By at least 2016, Wear began raising money for Water Station and Creative from 

retail investors through the issuance of investment contracts tied to Creative’s water machines.   

31. Under these investment contracts—the precise terms of which, as described below, 

evolved over time—investors paid a fixed price, typically $8,500 per machine though sometimes as 

much as $10,000, purportedly to purchase water machines.   

32. In addition, investors paid service fees to Water Station to place, install, manage, and 

service the water machines.  Water Station deducted these service fees from the machines’ purported 

monthly revenues that it paid to the investors. 

33. Investors also agreed to pay certain other expenses associated with the placement 

and service of the water machines in retail locations out of their machines’ purported monthly 

revenues, including a share of the commissions Water Station paid to retailers for hosting their 

machines and the cost of replacing water filters for their machines.  

34. Under the investment contracts, investors were supposed to receive monthly 

payments from Water Station that came from the net profits of their water machines, after fees and 

expenses.   

35. These profits were to be derived from Water Station’s efforts to place, service, and 

manage the water machines in locations across its retailer network.   

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1. Defendants Marketed the Water Machine Investments as Securities.   

36. Water Station and Creative, through Wear, retained in-house salespeople on 

commission to solicit investments in their water machine investment opportunities.   

37. Beginning at least in 2019, Wear also engaged third-party marketing firms to solicit 

investments in Water Station’s and Creative’s water machines, generally agreeing to pay these firms a 

commission of 10% of every dollar they raised for Water Station and Creative.   

38. Defendants pitched their water machine investment opportunities as a purely passive 

investment, offering steady income derived solely from Water Station’s servicing and management 

efforts.  According to Defendants’ marketing materials, investors would own the machines and 

collect regular streams of income as Water Station placed and serviced the machines, purportedly in 

highly-trafficked retail locations, and collected payments from water sales. 

39. In brochures and other marketing materials provided to potential investors, 

Defendants described the water machine investment as a “truly passive, turnkey investment” that 

was “ideal for the passive investor,” offering potential investors the opportunity to “maintain 

current activities without the responsibilities to carry out the day-to-day operations of the business.”   

40. Defendants’ marketing materials also touted the water machine investment as tax 

advantageous, permitting for immediate deductions and depreciation of the machines that 

supposedly enhanced the return on the investment.   

41. In some cases, the marketing materials provided to prospective investors guaranteed 

that Water Station would buy back the water machines from investors at or near their purchase price 

upon the election of the investor, offering investors additional protection against the investment’s 

downside risks.   

42. When soliciting potential investors, Defendants specifically targeted the veteran 

community, coordinating with veterans’ business advocacy groups to publicize the opportunity.  

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43. Defendants offered veterans preferred terms of investment, including lower 

minimum investments and down payments, higher guaranteed returns, and exclusive financing 

options, such as low or no-interest loans provided by Creative repayable over ten years.   

44. Defendants also encouraged prospective investors to finance their investments 

through debt.  Wear applied for and obtained a listing with the Small Business Administration’s 

(“SBA”) Franchise Directory, a listing of all franchises and other brands eligible for SBA financial 

assistance.  This listing publicly confirmed the eligibility of investments in Water Station and 

Creative’s water machines for SBA loans.   

45. To assist investors in accessing SBA financing, Wear offered investors the option of 

executing a “franchise agreement” with a Water Station affiliate, WST Franchise Systems LLC 

(“WST”), under which WST licensed its business model and trademark to investors for a fee.   

46. A franchise agreement was not required for an investment in Defendants’ water 

machines, and not all Retail Scheme investors signed one.  Investors who executed franchise 

agreements typically did so to obtain eligibility for an SBA loan to finance the investment, as the 

provisions governing SBA loans available to finance Water Station investments generally prohibited 

loans for securities purchases, but allowed loans for “franchise” opportunities.   

47. At least 127 investors obtained approximately $102 million in SBA loans to finance 

their investments in the Retail Scheme.   

48. Regardless of whether investors executed a franchise agreement, the substance of 

their investment in the Retail Scheme was the same:  investors purchased water machines from 

Creative in bulk and delegated placement and management of them to Water Station in exchange for 

a return based on a share of the machines’ profits 

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2. The “Partnership Model” (2016 – 2021) 

49. From 2016 through late 2021, Water Station and Creative raised money from Retail 

Scheme investors using a “joint venture,” or “franchise” model (together, the “partnership model”), 

through which investors executed: (a) a purchase order; (b) a service agreement; and, for franchise 

investors, (c) a franchise agreement. 

50. The Purchase Order:  Pursuant to the purchase order, investors agreed to pay 

Creative a fixed price (usually $8,500 per machine, though sometimes as much as $10,000) to 

become the “sole owner and titleholder” of specific machines identified in the purchase order by 

their unique serial numbers.   

51. The purchase orders did not give investors discretion over the locations of their 

water machines, which was generally left to Water Station’s discretion. 

52. Wear signed all purchase orders on behalf of Creative. 

53. The Service Agreement:  Investors executed a service and management agreement 

(“service agreement”) with Water Station at the same time they entered into an order to purchase 

water machines from Creative.  Pursuant to the service agreements, Water Station agreed to place 

and install investors’ machines at retail locations, to collect cash and credit card payments from the 

machines, and to manage “all day-to-day decisions” concerning the purchased machines in return 

for a servicing fee typically equal to 20% of the applicable machines’ monthly profits.   

54. Until approximately mid-2019, the service agreements provided that investors and 

Water Station would split the net profits generated by the investors’ water machines equally, after 

Water Station collected its 20% servicing fee and paid out other expenses (which included certain 

commissions paid to retailers to place the machines).   

55. Beginning in or around mid-2019, Water Station amended the terms of its service 

agreements to eliminate the profit-splitting structure for new, and for many existing, Retail Scheme 

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investors.  Instead, Water Station guaranteed investors fixed annual returns, which generally ranged 

from 12% to 20% of their investment.   

56. Water Station also generally promised investors in these service agreements a share 

(typically 30%) of any advertising revenues the company received from placing advertisements on 

the investors’ water machines.   

57. Although early versions of the service agreement provided for payments to investors 

based on the profits of their particular machines, all versions of the service agreement informed 

investors that Water Station would not segregate water machine revenues by machine, but rather 

would commingle machine revenues with the revenues generated by other investors’ machines.   

58. Additionally, although the service agreements stated that Water Station was “not 

required to maintain separate bank accounts [for] or to otherwise segregate” the water machine 

owners’ gross and net machine profits, the service agreements represented that Water Station would 

maintain all books and records relating to the water machines and, at least annually, provide 

investors with a report showing their particular machines’ gross and net profits, associated costs, as 

well as the total distributions Water Station paid them.   

59. The service agreements additionally gave Water Station the option (and, in some 

cases, the obligation, at the investor’s election) to buy the water machines back from investors at 

85% of the cost of the machines within the first three years of the investment, and at 100% of the 

cost of the machines thereafter.   

60. Wear signed all service agreements on behalf of Water Station. 

61. The Franchise Agreement:  Certain investors—i.e. those who financed their water 

machine investments through an SBA loan—also executed a franchise agreement with WST, under 

which WST licensed its business model and trademark to investors for a fee.   Investors who did not 

need or want an SBA loan to finance their investment generally did not execute the franchise 

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agreement or pay the franchise fee, but instead invested in water machines by executing the purchase 

order and service agreement only. 

62. Wear signed all franchise agreements on behalf of WST.   

63. At or after the time investors executed the purchase order and service agreement, 

either Creative or Water Station, through Wear, provided them with lists of the machines that they 

purchased and owned, identifying each machine by its unique serial number and confirming the 

location at which each machine was installed (“Machine Lists”).  Wear and Creative typically 

appended Machine Lists to investors’ purchase orders, although Water Station (through Wear) 

would sometimes send investors Machine Lists after execution of the purchase orders to update 

investors on the placement of their machines. 

3. The Private Placement Model (Late 2021 – 2023) 

64. In or around August 2021, Wear concluded that the purchase orders and service 

agreements, collectively, constituted an investment contract and therefore fell within the definition 

of “securities” under the federal securities laws.   

65. Defendants accordingly began selling the water machine investments pursuant to a 

private placement memorandum (“PPM”) that purported to rely on exemptions from registration 

under Regulation D (the “private placement model”). 

66. Beginning in at least January 2022, Defendants, as well as a registered broker-dealer 

they later retained to market the investments, distributed the PPM to prospective investors along 

with marketing materials and the purchase orders and service agreements.     

67. The PPM described the “security” being sold as an “Investment Contract” 

comprised of the purchase order and service agreement, the terms of which remained materially the 

same as those used previously under the partnership model with Retail Scheme investors.   

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68. The PPM represented that investors would receive a monthly fee based on a fixed 

annual rate of return specified in the service agreement (generally between 12% and 15% of the 

investment) plus a percentage (generally 30%) of any advertising revenue generated by the investors’ 

water machines.   

69. The PPM stated that “return[s] on the purchase of an Investment Contract will 

depend solely on the sales of water from each water [machine] the Investor purchases, and on the 

net advertising revenue attributable to each machine.”    

70. The PPM also stated that the offering proceeds would be used to finance the 

manufacture of the water machines sold under the investment contract, to pay broker fees if 

applicable, and to provide a return to Creative’s owners.   

71. Wear reviewed and approved the PPM on behalf of Water Station and authorized its 

use with potential investors.   

72. Investors in the private placement model subscribed by executing a subscription 

agreement, in addition to signing the purchase order and service agreement. 

73. Apart from the PPM’s acknowledgment that the purchase order and service 

agreement constituted a security and the requirement that investors sign a subscription agreement, 

investing in water machines under the private placement model was functionally the same as under 

the partnership model. 

74. As with investors under the partnership model, investors under the private 

placement model (a) purchased water machines from Creative, (b) delegated the machines’ 

placement and maintenance to Water Station, (c) received Machine Lists from Water Station and 

Wear identifying the serial number and location for each machine they supposedly purchased, and 

(d) received monthly fees purportedly derived from the management efforts of Water Station.   

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75. Wear signed all subscription agreements (as well as purchase orders and service 

agreements) on behalf of Water Station and Creative under the private placement model.   

76. From 2016 through April 2022, Defendants raised over $135 million from 

approximately 250 Retail Scheme investors under either the partnership model or the private 

placement model.1 

77. In so doing, Defendants purported to sell more than 15,000 water machines to 

investors.  Defendants represented in purchase orders and Machine Lists that they had placed these 

machines at locations in Defendants’ retailer network on these investors’ behalf.   

B. Defendants Defrauded Investors in the Retail Scheme. 

78. In fact, Defendants neither produced nor installed anywhere near 15,000 water 

machines.  The vast majority of the water machines Defendants purported to sell and manage did 

not exist at all or were not owned by Creative because they had already been sold to other investors.   

79. Indeed, during the Relevant Period, Water Station placed, at most, approximately 

2,600 machines at retail locations nationwide, only a fraction of the more than 15,000 water 

machines Defendants represented to investors that they had installed and placed in falsified 

purchase orders and Machine Lists. 

80. Defendants stored approximately 3,000 additional water machines in warehouses, 

but many of these machines were only partially built or otherwise inoperable—and, in any event, 

virtually none of these warehoused machines were either (a) located where Defendants represented 

them in purchase orders and/or Machine Lists to be, or (b) capable of producing revenues to 

generate investor distributions as promised.   

 
1  Defendants raised the nearly the entirety of those investments through the partnership model.  As of 
April 2022, only three investors signed subscription agreements, and Water station raised only approximately 
$3 million of funds from investors through the private placement model. 

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81. Accordingly, Wear’s and Creative’s representations in the purchase orders that 

investors would be the sole owners of actual, physical machines placed in the field were, in at least 

most cases, false and misleading. 

82. In addition to falsely overstating the number of water machines they sold, 

Defendants misrepresented the machines’ locations.  For example, according to Machine Lists that 

Defendants sent to investors during the Relevant Period, Defendants represented that Water Station 

had placed more than 3,800 investor water machines at nationwide locations of Retailer A, a national 

discount retail chain.  

83. These representations were false because, in fact, Retailer A hosted no more than 

120 of Defendants’ water machines during the Relevant Period.     

84. Defendants also routinely sold the same water machines to multiple investors.  For 

example, Water Station (through Wear) provided a Machine List to an investor (“Investor A”) in 

April 2022 identifying by serial number the 71 machines this investor purportedly owned under a 

purchase order executed in December 2021.  All but one of the serial numbers on Investor A’s 

Machine List also appeared on the Machine List that Defendants sent to a different investor 

(“Investor B”), who purportedly purchased these water machines months earlier, in April 2021, and 

who never sold or otherwise relinquished title to them.  

85. Accordingly, the representations in Investor A’s purchase order that Investor A 

would have sole title to the purchased water machines were false. 

86. In total, during the Relevant Period, Defendants sold at least 650 water machines 

bearing a unique serial number to more than one investor.  Dozens of machine serial numbers were 

assigned to at least four investors at once.    

87. As the founder, owner, and managing partner of Water Station and Creative, Wear 

(a) signed the purchase order and service agreement through which each Retail Scheme investor 

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invested in Defendants’ water machines; (b) had access to these entities’ vending management 

systems, which showed the number of machines actually placed and installed; (c) negotiated the 

placement of machines (and commission rates) with retail locations hosting Defendants’ machines; 

and (d) generated, reviewed, and/or disseminated (or facilitated the dissemination of) the Machine 

Lists for each investor.    

88. Accordingly, Wear knew or recklessly disregarded that Creative was falsely promising 

Retail Scheme investors exclusive ownership of water machines that, in reality, were either non-

existent or were already owned by others (or both), and which were not placed at the locations 

Defendants represented them to be. 

89. After inducing investments through the false representation of ownership of actual, 

physical water machines, Wear misappropriated the investment proceeds, including to fund the 

operations of his unrelated ventures—diverting tens of millions of dollars’ worth of investor funds 

to Refreshing, Ideal, as well as other businesses Wear founded and managed in other industries.  

90. Wear also used approximately $800,000 in investor funds to purchase a personal 

residence on Camino Island in Washington in July 2020. 

91. At least partly because Defendants promised returns on more water machines than 

they actually placed, Water Station was unable to generate enough machine revenues to cover Water 

Station’s guaranteed monthly distributions to investors.   

92. To cover these shortfalls—and to foster the pretense that investors possessed real, 

physical, and profitable water machines when they did not—Wear made putative distribution 

payments to Water Station’s investors using other sources, including using new investor money to 

make payments to existing investors in a Ponzi-like fashion.  For example: 

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a. In July 2020, three investors wired approximately $300,000 in new investments to a 

Creative bank account.  At Wear’s direction, almost a third of that money was 

transferred to pay outstanding investor distributions the same day.  

b. Between August 21 and August 24, 2020,  Wear directed the transfer of new investor 

funds received over that period to pay over $90,000 in investor distributions. 

c. In January 2022, Wear caused approximately $1 million in putative distributions to 

be paid to Retail Scheme investors using the proceeds of a loan obtained by Creative.   

d. On March 3, 2022, Creative received $340,000 in new investor money.  Wear routed 

that money to existing Retail Scheme investors to pay distributions and to fund 

Wear’s unrelated businesses within two days of receiving it.   

93. Wear directed these (and other) transfers to make payments to investors, and he 

therefore knew or recklessly disregarded that he was using new investor money and other sources to 

make payments to investors, and not money generated from water machine profits as represented. 

94. Even after it became clear, by at least the middle of 2020, that water machine profits 

were insufficient to cover investor distributions, and after he had resorted to covering shortfalls 

through other means, Wear continued to represent to later investors in service agreements and the 

PPM that their distributions would be paid using machine profits.   

III. THE NOTE SCHEME 

A. Defendants Offered and Sold Water Station Notes to Institutional Investors. 

95. By April 2022, Defendants faced significant cash flow shortages, lacking funds from 

either new investors or other sources to satisfy their distribution obligations to Retail Scheme 

investors.   

96. To prolong his scheme, Wear arranged for Water Station to issue Notes to 

institutional investors.   

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97. On April 29, 2022, at Wear’s direction, Water Station issued Class A Notes in the 

aggregate principal amount of $56.25 million and Class B Notes in the aggregate principal amount of 

$15 million under an indenture (“Indenture”), raising a total of approximately $71.25 million. 

98. A financial services company focused on community banking (“Institutional Investor 

A”) purchased the Class A Notes for $55.7 million. 

99. The Class B Notes were purchased by two affiliates of the Jefferies Financial Group 

(“Jefferies”), including the 3|5|2 Capital ABS Master Fund, LP (“352 Fund”), a private investment 

fund. 

100.  Jordan Chirico (“Chirico”), the portfolio manager for the 352 Fund, directed the 

purchases of the Class B Notes, with the 352 Fund paying approximately $8.9 million, and another 

Jefferies affiliate buying the remainder for approximately $6.1 million.     

101. Wear signed the Indenture on behalf of Water Station. 

102. In exchange for the Notes proceeds, Water Station pledged 2,794 water machines as 

collateral (“Initial Collateral”).  Water Station, at Wear’s direction, provided a list of the 2,794 water 

machines pledged as Initial Collateral to a bank appointed to serve as trustee (the “Trustee”) under 

the Indenture, identifying each machine by serial number and location (the “Initial Collateral List”).   

103.  Going forward, Water Station also agreed under the Indenture to pledge “Eligible 

Assets,” defined as newly manufactured water machines or existing machines less than five years old, 

to be purchased with the proceeds of the Notes.  These Eligible Assets then became part of the 

collateral pool securing the Notes.   

104. Wear represented in the Indenture that Water Station “ha[d] good and marketable 

title” to the Initial Collateral and Eligible Assets pledged under the Indenture, and that when 

transferred to the noteholders, the collateral would be “free and clear of any Encumbrances.”   

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105. Pursuant to the Indenture, Water Station granted a first priority security interest in 

the Initial Collateral and all Eligible Assets to the Trustee for the benefit of noteholders.   

1. The Indenture’s Restrictions on Defendants’ Use of Notes Proceeds 

106. The Indenture placed strict controls over the use of proceeds from the Water Station 

Notes offerings and water machine revenues.   

107. Under the Indenture, Notes proceeds were to be remitted into a segregated account 

with the Trustee (the “Acquisition Account”).   

108. With limited exceptions applicable to the initial funding, Water Station was 

prohibited from withdrawing funds from the Acquisition Account for any purpose other than to 

acquire water machines defined as Eligible Assets.2   

109. To assure that Water Station was using Notes proceeds only for their approved uses, 

before Water Station could make a withdrawal from the Acquisition Account, it was required to 

submit certain required documentation to the Trustee. 

110. The required documentation included:   

a. An invoice from Creative evidencing the purchase of new water machines identified 

by serial number;  

b. A purchase and sale agreement between Water Station and Creative (signed by 

Wear on behalf of both parties) in which Creative represented it had title to the 

water machines subject to the sale free and clear of any encumbrances and/or 

transfer restrictions and that the water machines sold were in good operating 

condition and repair.  Bills of sale attached to the purchase and sale agreement 

 
2  As part of the initial funding, Water Station was authorized to use a portion of the Notes proceeds to 
pay certain offering-related expenses, to buy back machines from certain retail investors to contribute to the 
Initial Collateral, and to make certain one-time lease payments on warehouses leased from Ideal that were 
purportedly used to store water machines.  After payment of these expenses, the remainder (approximately 
$38 million) was remitted into the Acquisition Account for the acquisition of Eligible Assets.   

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identified the machines sold to Water Station by serial number and placement 

location; and  

c. A withdrawal request from Water Station (also typically signed by Wear) in which 

Water Station certified that it would use the Notes proceeds “solely to fund the 

purchase of Eligible Assets” pursuant to the terms of the Indenture and related 

purchase and sale agreements.    

111. These documents were subject to review by the “Collateral Manager,” an 

independent financial institution appointed under an agreement that was executed 

contemporaneously with the Indenture and signed by Wear on behalf of Water Station.   

112. The Collateral Manager was required to review and approve each proposed 

acquisition of Eligible Assets by Water Station before the Trustee could release funds from the 

Acquisition Account.   

113. The Indenture imposed additional reporting obligations on Water Station, requiring 

it to provide the Collateral Manager and Trustee with monthly sales data for all water machines 

securing the Notes, quarterly performance reports, and periodic financial statements. 

2. The Indenture’s Restrictions on the Use of Water Machine Revenues   

114. The Indenture required that revenues from the water machines pledged to the Notes 

as Initial Collateral or Eligible Assets be remitted to a separate segregated account at the Trustee (the 

“Collection Account”).   

115. The Indenture authorized Water Station to withdraw funds monthly from the 

Collection Account to pay commissions to retailers, which typically ranged from 40% to 55% of the 

revenues generated by the water machines purportedly placed at their stores.   

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116. Each month, Water Station was required to submit to the Collateral Manager a 

report detailing the revenues earned by the water machines serving as collateral for the Notes and 

the commissions Water Station owed to the retailers where those machines were placed. 

117. Upon review and approval of this report, the Collateral Manager would, per the 

Indenture, instruct the Trustee to transfer the amounts owed as commissions from the Collection 

Account to a Water Station bank account from which Water Station was to then distribute the 

commissions it owed to retailers.   

118. Under the Indenture, balances from the Collection Account, net of retailer 

commission payments, were used to compensate the Trustee and Collateral Manager and to make 

interest and principal payments to noteholders. 

B. Defendants Defrauded Investors in the Note Scheme.  

1. Defendants Fraudulently Misappropriated and Diverted Notes 
Proceeds from the Acquisition Account.   

119. Defendants induced investments in the Notes on fraudulent pretenses and 

misappropriated millions of dollars of Notes proceeds through numerous deceptions and false 

representations.   

120. The Initial Collateral List identifying the water machines that Wear, on behalf of 

Water Station purported to have pledged to secure the Notes contained hundreds of machines that 

did not exist, that were already owned by Retail Scheme investors, and/or were not in the locations 

identified. 

121. Water Station’s representation in the Indenture that Water Station had “good and 

marketable title” to the water machines included on the Initial Collateral List—and that such assets 

were “free and clear” of any encumbrances—was therefore false.   

122. Wear’s and Water Station’s representation in the Indenture that they would use 

Notes proceeds exclusively to acquire Eligible Assets—that is, water machines—was also false.  

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123. For example, on May 19, 2022, just three weeks after the first Notes offering closed, 

Wear submitted Water Station’s very first withdrawal request to the Trustee, seeking approximately 

$480,000 from the Acquisition Account.  

124. Wear represented to the Trustee in the request that “the funds so withdrawn will be 

used solely to fund the purchase of Eligible Assets,” and attached an invoice and purchase and sale 

agreement that supposedly identified by serial number the 58 new water machines to be acquired 

with the requested funds.   

125. This representation was false.  

126. As Wear acknowledged in an email to Water Station’s financial controller on May 20, 

2022, Water Station needed “all of the bond draw for partner payments.”  In other words, Water 

Station needed all of the Notes proceeds he was withdrawing for payments to Retail Scheme 

investors. 

127. Consistent with this email, and contrary to his representation to the Trustee, Wear 

used the approximately $480,000 from the Acquisition Account to pay distributions to investors in 

the Retail Scheme and not to purchase new water machines as required.   

128. Additionally, the invoice and purchase and sale agreement attached to Wear’s May 

19, 2022, withdrawal request were fabricated, representing water machine sales that never, in fact, 

occurred.   

129. Wear’s subsequent requests to withdraw funds from the Acquisition Account 

followed a similar pattern.  

130. From May 2022 through November 2022, Water Station, through Wear, submitted 

nineteen withdrawal notices to the Trustee, each representing that the funds withdrawn would be 

used “solely” to fund the purchase of Eligible Assets.  In aggregate, these requests, and their 

supporting invoices and purchase and sale agreements, purported to evidence that Water Station had 

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used the Notes proceeds to acquire more than 4,000 new water machines from Creative, and to buy 

back more than 750 machines from investors in the Retail Scheme, which Water Station then 

pledged to the Trustee as collateral for the Notes.   

131. By the end of November 2022, Water Station had fully drawn down the 

approximately $38 million initial funding of the Acquisition Account under the Indenture.  

132. On January 23, 2023, Water Station issued approximately $25 million of additional 

Class A and B Notes under a supplemental Indenture (the “First Supplemental Indenture”), bringing 

the total amounts raised through the Notes offering to nearly $100 million.   

133. The Notes issued under the First Supplemental Indenture were subject to the same 

restrictions and reporting requirements the initial Indenture placed upon Water Station’s 

withdrawals of both the Notes proceeds from the Acquisition Account and retail commission 

payments from the Collection Account.  As with the initial Indenture, Water Station could only use 

Notes proceeds to purchase Eligible Assets, and Water Station represented that it had “good and 

marketable title” to any Eligible Assets it pledged under the Indenture and that when transferred to 

the noteholders, such collateral would be “free and clear of any Encumbrances.”   

134. Between February 2 and April 25, 2023, Water Station, through Wear, submitted six 

withdrawal notices to the Trustee, each representing that the funds withdrawn would be used 

“solely” to fund the purchase of Eligible Assets.  These notices and their supporting documentation 

purported to evidence that Water Station had used the Notes proceeds to acquire an additional 

approximately 2,850 new water machines from Creative as Eligible Assets that Water Station then 

pledged to the Trustee.   

135. By April 2023, Water Station had fully withdrawn the Notes proceeds raised under 

the First Supplemental Indenture.   

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136. In total, by April 2023, under the Indenture and First Supplemental Indenture, Water 

Station withdrew approximately $63.6 million in Notes proceeds from the Acquisition Account, and 

purported to pledge 10,464 water machines (including the Initial Collateral) to the Trustee as 

collateral to secure the Notes.   

137. The 10,464 water machines that Water Station supposedly acquired and installed at 

retailers and to have pledged as security for the Notes exceeded the number of machines that 

Creative had ever manufactured, much less placed in the field.   

138. In actuality, most of the water machines Wear and Water Station claimed to have 

purchased with Notes proceeds either did not exist or had already been sold to Retail Scheme 

investors (and were not repurchased using these Notes proceeds).  

139. Wear’s representations in the withdrawal requests described in paragraphs 130 and 

134 that the withdrawn funds would be used solely to fund the purchase of Eligible Assets were, 

accordingly, false.   

140. At Wear’s direction, Water Station fabricated the invoices and purchase and sale 

agreements that it submitted with these withdrawal requests to reflect sales from Creative to Water 

Station of fictitious water machines and/or water machines that Creative did not own.    

141. Wear and Water Station also routinely generated and submitted falsified financial 

reports, including sales and performance reports, to the Collateral Manager and the Trustee.   

142. These reports falsely vouched for the existence of non-existent water machines, 

falsified the locations at which these machines were purportedly installed and placed, and fabricated 

the revenues that these machines generated.  

143. For example, at Wear’s direction, Water Station represented to the Collateral 

Manager in withdrawal requests and in sales and performance reports that, as of April 2023, Water 

Station had placed 3,367 of the 10,464 water machines supposedly securing the Notes with Retailer 

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A, a retailer that (as detailed above) had in fact hosted no more than 120 machines across its stores 

during the Relevant Period.   

144. Water Station also represented in these reports that, as of April 2023, Water Station 

had placed an additional 4,099 machines across three other retailers (Retailers B, C, and D), none of 

which hosted a single Water Station water machine at any location during the Relevant Period.   

145. In total, Wear reported in invoices, purchase sales and sales agreements, and other 

sales data and performance reports, that Water Station had placed at least 70% of the water 

machines purportedly securing the Notes with retailers that, in actuality, had no (or only nominal) 

business with Water Sation, as reflected in the below chart: 

Retailer Eligible Assets Reportedly Placed at 
Retailer 

Eligible Assets Actually Placed at 
Retailer 

Retailer A 3,367 112 
Retailer B 442 0 
Retailer C 718 0 
Retailer D 2,939 0 
Total 7,466 (out of 10,464 machines) 112 

 
146. Contrary to Wear and Water Station’s representations that Water Station would use 

funds withdrawn from the Acquisition Account solely to buy water machines, Wear and Water 

Station then misappropriated and diverted these funds unauthorized purposes.   

147. Of the $63.6 million Water Station withdrew from the Acquisition Account between 

May 2022 and April 2023, Defendants misappropriated and siphoned more than $59 million for 

purposes other than purchasing water machines—including using (a) more than $15 million to pay 

distributions to Retail Scheme investors; (b) more than $10 million to fund the operations of Wear’s 

other businesses, including Refreshing and Ideal; and (c) approximately $5 million to fund the 

Collection Account in order to cover interest payments due to the same holders of the Notes whose 

investments had funded the Acquisition Account.  

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2. Defendants Fraudulently Misappropriated and Diverted Notes 
Proceeds from the Collection Account. 

148. At Wear’s direction, Water Station routinely provided revenue reports to the 

Collateral Manager that materially overstated the amount of revenues generated by the water 

machines Water Station had actually placed at retail locations.   

149. In turn, because retailer commissions were based on a percentage of this reported 

revenue, these inflated revenue figures had the effect of falsely inflating the amount of commissions 

Wear reported being required to pay to retailers.   

150. Providing inflated revenue and commission figures to the Collateral Manager and 

Trustee allowed Wear to access funds from the Collection Account that, based on the actual, lower 

commission totals, he would not have been able to access.   

151. For example, Wear approved the submission of sales reports and other data to the 

Collateral Manager representing that, between May 2022 and December 2023, the more-than 3,200 

machines purportedly placed at Retailer A had generated approximately $6.5 million in customer 

revenues over the period, resulting in corresponding commission payments due to Retailer A of 

about $3.15 million.   

152. Upon review and approval of the Collateral Manager, the Trustee disbursed this 

$3.15 million from the Collection Account to a Water Station bank account to allow Water Station 

to make its claimed commission payments to Retailer A. 

153. But, as reflected in Water Station’s internal sales and commission reports, over the 

May 2022 to December 2023 period, Water Station only actually placed about 112 water machines at 

Retailer A stores, and those machines generated only about $150,000 in customer revenues.   

154. The commissions Water Station actually paid to Retailer A between May 2022 and 

December 2023 totaled only about $60,000.   

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155. Wear misappropriated and diverted the difference between the $3.15 million in 

commission amounts he falsely told the Collateral Manager and Trustee he paid Retailer A and the 

$60,000 he actually paid Retailer A in commissions.   

156. By similarly overstating the purported commissions paid to other retailers, 

Defendants were able to misappropriate or otherwise divert a total of at least $5 million from the 

Collection Account during the Relevant Period.   

3. Defendants Made Deposits into the Collection Account to Conceal 
Their Fraud.  

157. Had Defendants deposited only actual water machine revenues into the Collection 

Account, the resulting deficit would have exposed the falsity of the invoices, purchase and sale 

agreements and collateral reports Defendants had been submitting to the Collateral Manager and 

Trustee.   

158. To avoid detection of their fraud and to maintain the illusion that the thousands of 

fictitious water machines Defendants claimed to have placed were real, Wear directed funds into the 

Collection Account from other sources to create the appearance that these fictitious machines were 

generating revenue.  

159. For example, Wear directed funds into the Collection Account from: (a) new 

investments in the Retail Scheme (including Investor C, described below at paragraphs 161 to 172), 

(b) revenues from other types of vending machines (i.e., not water machines) owned by Refreshing; 

and (c) funds that Wear misappropriated from the Acquisition Account.   

160. In sales reports provided to the Collateral Manager, Wear falsely classified these 

other sources of funds as water machine revenues, bolstering the fiction that the Notes were 

collateralized with thousands of revenue-generating water machines in the field when, in reality, both 

the number of the machines and the revenues they generated were substantially overstated.    

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IV. DEFENDANTS FRAUDULENTLY INDUCED AN INVESTMENT FROM 
INVESTOR C. 

161. Defendants’ successful closing of the first Notes offering in April 2022 allowed Wear 

to present Water Station and Creative as well-capitalized and positioned for growth, enabling Wear 

to generate additional demand from investors and to recruit new victims for the Retail Scheme. 

162. In November 2022, between Water Station’s first and second Notes issuances, 

Defendants secured its largest ever investment in the Retail Scheme by inducing Investor C, a 

private company focused on investing in water-related businesses, to enter into a purchase and sale 

agreement for water machines to be serviced and managed by Water Station.   

163. Pursuant to a November 2022 master purchase agreement, and several supplemental 

purchase and sale agreements executed through January 2023, Investor C invested $32.2 million in 

Water Station.   

164. In exchange for that investment, Water Station purported to sell Investor C 3,427 

water machines, which Water Station allegedly had acquired from existing investors in the Retail 

Scheme who purportedly had agreed to sell their water machines back to Water Station.   

165. Under a corresponding service agreement, Water Station agreed to place, manage, 

and service Investor C’s water machines.  The service agreement promised Investor C a fixed 

annualized return of 12%.   

166. Wear signed each of the purchase and sale agreements and the service agreements 

related to the sales of water machines to Investor C.   

167. In these agreements, Wear identified by serial number and location each of the water 

machines Water Station purportedly purchased from investors in the Retail Scheme on Investor C’s 

behalf.  

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168. Wear also represented in these agreements that the water machines Water Station 

purchased on Investor C’s behalf were in good and operable condition, and that Investor C would 

have exclusive title to them.   

169. These representations were false.   

170. Wear did not, as represented, enter into agreements to buy back over 3,000 water 

machines from existing investors in the Retail Scheme on Water Station’s behalf for resale to 

Investor C.  Rather, at Wear’s direction, Water Station provided Investor C a list of water machines 

that did not exist and/or were pledged or sold to other investors.    

171. As Wear knew or recklessly disregarded by virtue of his role as signatory to the 

Indenture, Indenture supplements, and withdrawal requests pledging water machines as collateral to 

the Trustee, at least 2,000 of the water machines that Defendants purported to sell to Investor C had 

already been pledged as collateral to the Note Scheme, including approximately 600 machines that 

were purportedly placed at Retailer A but did not actually exist.   

172. Rather than use Investor C’s $32.2 million to acquire water machines from existing 

investors as promised, Wear directed that at least $13.7 million of the investment be routed to bank 

accounts belonging to Defendants to (a) pay outstanding distributions to earlier investors in the 

Retail Scheme; (b) fund the Collection Account to create the false appearance that the Eligible 

Assets were generating revenue in-line with what Defendants’ fabricated collateral reports had 

represented; and (c) make payments on commercial loans related to Wear’s other, unrelated business 

interests.   

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V. RELIEF DEFENDANTS WERE UNJUSTLY ENRICHED. 

173. During the Relevant Period and throughout the period in which their fraudulent 

Retail and Note Schemes were ongoing, Defendants paid more than $47 million to Refreshing 

($41.5 million) and Ideal ($6.2 million).   

174. Refreshing did not provide consideration justifying its receipt of this $41.5 million.  

175. Ideal did not provide consideration justifying its receipt of this $6.2 million. 

VI. DEFENDANTS’ FRAUDULENT SCHEMES UNRAVEL. 

176. By April 2023, with no new investments coming in, and having completely exhausted 

both the initial proceeds from the Note Scheme and the funding from Investor C, Defendants 

stopped making guaranteed monthly distributions to investors in the Retail Scheme.   

177. Over the summer of 2023, the Collateral Manager began to question the accuracy of 

the data reported by Water Station in its invoices, purchase and sale agreements, and sales and 

performance reports.   

178. In or around August 2023, the Collateral Manager commissioned a third-party to 

perform spot checks of locations that Water Station had represented to have placed water machines 

that were supposedly collateralizing the Notes.   

179. This third-party firm reported to the Collateral Manager that 163 of the 164 locations 

it visited had no Water Station water machines on site.   

180. The Collateral Manager, in turn, relayed this finding to Wear by email on August 11, 

2023 and sought an explanation for the discrepancy.   

181. On August 16, 2023, the Collateral Manager informed Wear by email that Water 

Station had 90 days (a “Cure Period”) per the terms of the Indenture to provide information 

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verifying the existence and the location of “3000+ machines” ostensibly securing the Notes that the 

Collateral Manager determined were “actually missing.”3 

182. The Cure Period expired in November 2023 without Wear providing sufficient 

information to substantiate the existence of the machines the Collateral Manager identified.  During 

this period, Wear also cut off the Collateral Manager’s access to Water Station’s vending 

management system, preventing the Collateral Manager from viewing real-time evidence of Water 

Station’s purported water machine operations and performance.   

183. In December 2023, the 352 Fund (and a Jefferies affiliate) bought out the Class A 

Notes held by Institutional Investor A at a discount, leaving the 352 Fund as the primary holder of 

all classes of the Notes.   

184. Also in December 2023, after months of not receiving its guaranteed distribution 

payments, Investor C filed an arbitration claim against Defendants and other Wear entities, alleging, 

among other things, that the water machines Investor C purportedly purchased were not free and 

clear of prior liens and claims, were not present at the locations they had represented them to be, 

and may not have existed at all.   

185. Over the course of the end of 2023 and into 2024, numerous other victims of the 

Retail Scheme initiated lawsuits against Defendants due to their failure to make promised 

distribution payments, with many of these suits accusing Wear of operating a Ponzi scheme.   

186. In January 2024, Chirico requested that Water Station’s director of equipment 

services provide him directly with a report from Water Station’s vending management system listing 

all operable water machines placed in retailer locations.  The report showed that Water Station had  

 
3  Under the Indenture, if any water machines securing the Notes were discovered to require 
maintenance or repairs (i.e. were non-operational), Water Station had 90 days to demonstrate that it had 
performed all necessary repairs, or else would be required to refund to the Collections Account all cash used 
to purchase such machines.   

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only 2,342 machines placed in the field at retailer locations, far less than the more than 10,000 

machines purportedly securing the Notes that Water Station had reported through its Initial 

Collateral List, invoices, and purchase and sale agreements.  

187. On January 29, 2024, Wear participated in a recorded call with Chirico and 

Individual A, a mutual friend of Chirico and Wear’s who had extensive business dealings with Wear 

and Water Station, including as one of Water Station’s earliest partnership model investors. 

188. During the call, Chirico asked Wear if a substantial portion of the collateral for the 

Notes were actually vending machines, rather than water machines.  Individual A raised the 

possibility that a large portion of the water machines did not exist at all.   

189. Wear did not deny the allegations and provided no explanation as to the existence or 

the whereabouts of the missing water machines.  Wear acknowledged that he did not know where 

the relevant water machines were and suggested instead that he would look for alternative funding 

sources to repay Water Station’s investors.   

190. On the call, Individual A accused Wear of running “the largest franchise fraud in the 

history of the United States.”  

191. The 352 Fund and Water Station entered into another supplemental Indenture on 

February 2, 2024, under which Water Station sold the 352 Fund an additional approximately $16.7 

million worth of Notes, bringing the total raised through Water Station’s note offering to 

approximately $111 million.   

192. In May and June, 2024, the Trustee issued notices of default to Water Station under 

the Indenture.   

193. In May 2024, Creative was placed into receivership through the Receivership Action.   

194. In August 2024, the order appointing the receiver in the Receivership Action was 

amended to place Water Station (as well as Refreshing) into the receivership, at which time Wear 

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was removed from his role as managing partner of Water Station and Creative and divested of any 

management authority with respect to them.   

195. In August 2024, creditors filed involuntary Chapter 11 bankruptcy proceedings 

against Water Station and Creative.   

196. In April 2025, counsel for the estates of Water Station and Creative in their pending 

bankruptcy proceeding filed a preliminary accounting listing water machines placed in retail locations 

as of October 2024, the last date for which Water Station’s and Creative’s vending management 

system had data.   

197. That list reported that only 2,107 water machines had been placed in retail locations 

as of October 2024.  Many of the machines included on the list were claimed by multiple creditors 

because Defendants frequently sold the same machine to more than one investor.    

198. Counsel to Creative’s and Water Station’s estate in bankruptcy additionally identified 

approximately 2,700 water machines inventoried in warehouses across various states—many of 

which were only partially built or otherwise inoperable, and many of which likewise were claimed by 

multiple creditors.  

FIRST CLAIM FOR RELIEF 
Violations of Securities Act Section 17(a) 

(All Defendants) 
 

199. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 198. 

200. Defendants, directly or indirectly, singly or in concert, in the offer or sale of 

securities and by the use of the means or instruments of transportation or communication in 

interstate commerce or the mails, (1) knowingly or recklessly have employed one or more devices, 

schemes or artifices to defraud, (2) knowingly, recklessly, or negligently have obtained money or 

property by means of one or more untrue statements of a material fact or omissions of a material 

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fact necessary in order to make the statements made, in light of the circumstances under which they 

were made, not misleading, and/or (3) knowingly, recklessly, or negligently have engaged in one or 

more transactions, practices, or courses of business which operated or would operate as a fraud or 

deceit upon the purchaser. 

201. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert, 

have violated and, unless enjoined, will again violate Securities Act Section 17(a) [15 U.S.C. § 77q(a)]. 

SECOND CLAIM FOR RELIEF 
Violations of Exchange Act Section 10(b) and Rule 10b-5 Thereunder 

(All Defendants) 
 

202. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 198. 

203. Defendants, directly or indirectly, singly or in concert, in connection with the 

purchase or sale of securities and by the use of means or instrumentalities of interstate commerce, or 

the mails, or the facilities of a national securities exchange, knowingly or recklessly have (i) employed 

one or more devices, schemes, or artifices to defraud, (ii) made one or more untrue statements of a 

material fact or omitted to state one or more material facts necessary in order to make the 

statements made, in light of the circumstances under which they were made, not misleading, and/or 

(iii) engaged in one or more acts, practices, or courses of business which operated or would operate 

as a fraud or deceit upon other persons. 

204. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert, 

have violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] 

and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

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THIRD CLAIM FOR RELIEF 
Control Person Liability for Violations of Exchange Act Section 10(b) and Rule 10b-5 

(Wear) 

205. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 198.  

206. As alleged above, Water Station and Creative violated Exchange Act Section 10(b) 

[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

207. At all relevant times, Wear controlled Water Station and Creative and was a culpable 

participant in Water Station and Creative’s violations of Exchange Act Section 10(b) [15 U.S.C. 

§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

208. By reason of the foregoing, Wear is liable as a controlling person pursuant to 

Exchange Act Section 20(a) [15 U.S.C. § 78t(a)] for Water Station’s and Creative’s violations of 

Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

FOURTH CLAIM FOR RELIEF 
Unjust Enrichment 
(Relief Defendants) 

 
209. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 198. 

210. As described above in Paragraphs 173 to 175, Refreshing and Ideal received 

approximately $41.5 million and $6.2 million, respectively, in investor proceeds raised through the 

Retail and Note Schemes.    

211. Relief Defendants have no legitimate claim to these ill-gotten gains.  

212. Relief Defendants obtained the funds under circumstances in which it is not just, 

equitable, or conscionable for her to retain the funds.  

213. Relief Defendants have therefore been unjustly enriched. 

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PRAYER FOR RELIEF 

 WHEREFORE, the Commission respectfully requests that the Court enter a Final 

Judgment: 

I. 

Permanently enjoining Defendants and their agents, servants, employees and attorneys and 

all persons in active concert or participation with any of them from violating, directly or indirectly, 

Securities Act Section 17(a) [15 U.S.C. § 77q(a)] and Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] 

and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5(b)].  

II. 

Ordering Defendants to disgorge all ill-gotten gains they received directly or indirectly, with 

pre-judgment interest thereon, as a result of the alleged violations, pursuant to Exchange Act 

Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; 

III. 

Ordering Defendants to pay civil monetary penalties under Securities Act Section 20(d) 

[15 U.S.C. § 77t(d)] and Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3]; 

IV. 

Ordering Relief Defendants to disgorge, with prejudgment interest, all ill-gotten gains by 

which they were unjustly enriched, pursuant to Exchange Act Sections 21(d)(3), 21(d)(5), and 

21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)];  

V. 

Permanently prohibiting Wear from serving as an officer or director of any company that 

has a class of securities registered under Exchange Act Section 12 [15 U.S.C. § 78l] or that is 

required to file reports under Exchange Act Section 15(d) [15 U.S.C. § 78o(d)], pursuant to 

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Securities Act Section 20(e) [15 U.S.C. § 77t(e)] and Exchange Act Section 21(d)(2) [15 U.S.C. 

§ 78u(d)(2)]; 

VI. 

Permanently enjoining Wear from, directly or indirectly (including, but not limited to, 

through any entity owned or controlled by Wear) participating in the issuance, purchase, offer or 

sale of any security, provided, however, that such injunction shall not prevent Wear from purchasing 

or selling securities for his own personal account; and 

VII. 

Granting any other and further relief this Court may deem just and proper.  

JURY DEMAND 

 The Commission demands a trial by jury.  

 
 
Dated: New York, New York 

August 14, 2025 

_/s/ David Zetlin-Jones____________________   
Lee A. Greenwood 
David Zetlin-Jones 
Heather L. Shaffer 
Ming Ming Yang 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
100 Pearl Street  
Suite 20-100 
New York, NY 10004-2616 
(212) 336-0978 (Zetlin-Jones) 
[email protected] 
  

 

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