UPDATE, JUNE 11, 2018: Andrew Deme, former president of Waters Club Holdings, will spend 18 months in jail and must pay about $1.3 million in restitution. This follows pleading guilty in March to conspiring to commit fraud. Notably, the maximum penalty that Demme faced was up to 20 years in prison.
Federal prosecutors state that Waters Club remains in business under different management.
Read on for our original article.
The head of a yacht-sharing company faces conspiracy and fraud charges. They stem from an alleged investment-fraud scheme involving the company, Waters Club Holdings.
In late November, a federal grand jury in Connecticut indicted Andrew Deme, president of Waters Club, on five counts. He faces one count of conspiracy to commit mail and wire fraud, two counts of wire fraud, and two counts of mail fraud. The U.S. attorney’s office in Connecticut released a statement on December 6 detailing the charges. It claims that Deme and unnamed co-conspirators misappropriated about half of investors’ funds for personal use. It adds that the co-conspirators received commissions for recruiting investors. This, the U.S. attorney’s office explains, contradicts what the businessmen told potential investors as well as the Securities and Exchange Commission (SEC).
Authorities arrested Deme in Fort Lauderdale on December 5. He’s free on bond, pending a yet-unscheduled arraignment in Connecticut.
Waters Club issued shares of stock via public offering to raise capital under SEC rule 506(c). Investor documents show that the minimum investment was $10,000. The funds would help buy and maintain a fleet of megayachts, plus support general business. Waters Club indicated it owned the 116-foot (35-meter) Acqua (above), based in the Virgin Islands and Bahamas. It intended to purchase additional megayachts from 80 to 120 feet (about 24 to 37 meters), too, situating them worldwide. Furthermore, it planned to partner with luxury-oriented, sharing-economy companies in private aviation, the vacation-home sector, and more. Waters Club intended to offer yacht charters to their clients, plus provide its own members with additional benefits.
According to the U.S. attorney, Deme and others approached potential investors in Connecticut and across the United States. In the process, it indicates, they told investors that they either didn’t receive commissions for selling company stock, or received stock in lieu of compensation. Deme reaffirmed the lack of commissions and finders’ fees in an SEC filing in December. Furthermore, the indictment indicates that Deme and fellow executives presented Waters Club as a financially sound company.
However, the indictment adds, Waters Club and its holding company weren’t financially sound. In addition, the U.S. attorney says “a substantial portion of investors’ money was not used to develop the business.” As mentioned above, the indictment references half of investors’ money. It doesn’t specify the dollar amount, though. Finally, according to the U.S. attorney, the indictment alleges Deme’s co-conspirators received sales commissions, vs. stock, for recruiting investors.
The U.S. attorney’s office says the FBI and IRS are conducting the ongoing investigation.
We were unsuccessful in reaching Deme for comment by press time.
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