A Washington state entrepreneur and a former Jefferies portfolio manager were criminally charged on Thursday over a Ponzi scheme and related fraud involving water vending machines that totalled as much as $275 million, with military veterans among the victims, U.S. authorities said.

Ryan Wear, the former owner of Water Station Management, was charged in Manhattan with securities and wire fraud. Jordan Chirico, who worked at Jefferies' Leucadia Asset Management unit, was charged with securities and investment adviser fraud.

The U.S. Securities and Exchange Commission filed related civil charges against both men and Water Station, saying the fraud spanned from late 2016 to early 2024.

A lawyer for Wear did not immediately respond to requests for comment, while a lawyer for Water Station declined to comment.

Robert Gage, a lawyer for Chirico, said in a statement: "Today's indictment has the story exactly backwards. Jordan Chirico is not the villain. He's a victim. ... We look forward to clearing Jordan's name in court."

Authorities said Wear, 49, of Everett, Washington, defrauded ordinary investors and veterans into buying more than 15,000 purported revenue-generating water machines, and sold bonds he falsely claimed were collateralised by his machines.

According to court papers, Wear manufactured far fewer machines than he claimed, sold some to multiple investors, and used new money to repay earlier investors and cover personal expenses, including a home on Camano Island near Seattle.

Chirico, 41, of Carmel, Indiana, allegedly breached his fiduciary duty to investors in Leucadia's 3/5/2 Capital ABS Master Fund, which he managed, by concealing conflicts of interest.

Authorities said Chirico bought $107 million of Water Station bonds for the fund without revealing his $7 million stake in the company and millions of dollars of distributions and referral fees.

Chirico allegedly also ignored "red flags" that many water machines did not exist, and made getting his own money back before his investors' money a higher priority.

Leucadia is winding down the 3/5/2 fund, which has recovered none of its bond principal, authorities said.

Water Station was forced into Chapter 11 bankruptcy last August, two months after Leucadia ended Chirico's employment, the SEC said. Jefferies and Leucadia were not charged.

"The deception and obfuscation these two men allegedly engaged in to siphon funds from retail investors, even U.S. military veterans, is absolutely unconscionable," FBI Special Agent in Charge W. Mike Herrington said in a statement.