There has not been much news regarding SEC[1] enforcement lately, but today the SEC and DOJ[2] both charged a founder of a Washington-based water vending machine manufacturer Water Station Management, LLC and two related companies for perpetrating two separate, albeit related, Ponzi schemes. This is not what Michael Burry meant when he said he was investing in water.
The first scheme allegedly raised $165 million from retail investors by selling them investment contracts supposedly for the purchase of revenue-generating water vending machines. In truth, according to the agencies, thousands of the water vending machines either did not exist or had already been sold to other investors.
The second scheme allegedly raised $110 million from institutional investors through the issuance of Water Station notes purportedly collateralized by water vending machines, many of which did not exist or were not owned by Water Station.
In separate actions, both agencies charged an investment adviser with fraud and breach of fiduciary duty to his private fund client. The adviser allegedly directed the fund to purchase notes without disclosing that he had a significant personal investment in the business. He also allegedly caused the fund to substantially increase his investment in the fund despite glaring red flags that some of the purported collateral may have been fabricated.
The SEC seeks its usual remedies of injunctive relief and civil penalties, along with disgorgement and an officer-and-director bar against the founder and owner of the manufacturer. The DOJ charges could result in 20-year prison sentences.
[1] SEC Press Release 2025-107, Founder and Owner of Washington-Based Water Machine Manufacturer and Two Companies Charged in $275 Million Fraud Scheme (Aug. 14, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-107-founder-owner-washington-based-water-machine-manufacturer-two-companies-charged-275-million-fraud?utm_medium=email&utm_source=govdelivery.
[2] United States Attorney’s Office, Southern District of New York Press Release 25-189, Defendants Charged In Over $200 Million Water Vending Machine Ponzi Scheme And Related Investment Fraud (Aug. 14, 2025), available at https://www.justice.gov/usao-sdny/pr/defendants-charged-over-200-million-water-vending-machine-ponzi-scheme-and-related.