Executive of Yacht Sharing Club Admits to Operating Investment Fraud Scheme
John H. Durham, United States Attorney for the District of Connecticut, announced that ANDREW DEME, 52, of Fort Lauderdale, Florida, pleaded guilty today before U.S. District Judge Jeffrey A. Meyer in New Haven to a conspiracy charge stemming from an investment fraud scheme.
According to court documents and statements made in court, DEME was the President and sole Director of Waters Club Worldwide, Inc. (“WCW”). In November 2016, WCW completed a merger with Petrus Resources Corporation and the merged company subsequently changed its name to Waters Club Holdings, Inc. (“Waters Club”). DEME became President, Chief Executive Office and Chief Financial Officer of Waters Club. According to a Waters Club document used to solicit investors and business partners, Waters Club sought to “introduce a revolutionary Sharing Economy model to yachting” by “form[ing] a membership-based Club with a fleet of yachts strategically located in the world’s leading cruising regions that members can share and use interchangeably for their yachting vacations.”
In pleading guilty, DEME admitted that promoters he hired made certain misrepresentations to prospective investors in Waters Club, including that money would be used to develop the business and fund the operations of Waters Club, and that promoters were not being paid commissions for recruiting investors. In truth, DEME knew that approximately half of all the money paid by investors for shares of Waters Club was paid to the promoters as sales commissions. Due in part to the payments to promoters, which totaled approximately $605,204, Waters Club lacked the capital to develop its membership-based club, did not pursue an IPO, and the shares purchased by investors were unsalable.
One of the victims of this investment scheme was a Connecticut resident who invested $475,000 in Waters Club.
DEME pleaded guilty to one count of conspiracy to commit mail and wire fraud, an offense that carries a maximum term of imprisonment of 20 years. Judge Meyer scheduled sentencing for June 7, 2018.
DEME has been released on a $100,000 bond since his arrest on December 5, 2017.
Two Waters Club promoters, Thomas Heaphy, Jr. and Brian Ferraioli, both of New York, previously pleaded guilty to the same charge. Heaphy and Ferraioli recruited at least 12 investors to pay a total of at least $1,289,500 for shares of Waters Club stock. Heaphy’s total gain from the scheme was $307,658, and Ferraioli’s total gain was $297,546.
This investigation is being conducted by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation Division. The case is being prosecuted by Assistant U.S. Attorney Avi M. Perry.