UPDATE, MAY 8, 2018: Thomas Heaphy, Jr. should report to prison in July to serve six years. A judge sentenced him this week for his role in the Waters Club scheme. He further must pay $6.7 million in restitution to victims of the scheme as well as the Internal Revenue Service.
UPDATE, MARCH 18, 2018: Andrew Deme, former president of Waters Club Worldwide, has pleaded guilty to conspiring to commit fraud. He faces sentencing on June 7, up to 20 years in prison. According to federal prosecutors, Waters Club remains in business under different management.
Read on for our original article.
A businessman soliciting investors in The Waters Club, a fractional yacht-ownership company, may spend 20 years in prison. This follows a guilty plea related to investment fraud.
According to the U.S. Attorney’s office in Connecticut, Thomas Heaphy, Jr. waived his right to be indicted. Instead, he pled guilty, on February 22. Specifically, he pled guilty to one count of conspiracy to commit mail and wire fraud.
Court records show that from August 2016 to February 2017, Heaphy and an unnamed individual promoted securities of Waters Club Worldwide and Waters Club Holdings. They did business as The Waters Club, offering shares of megayachts. The 107-foot (32.6-meter) Broward Double Down was the first in the fleet. The fleet would include yachts from 80 to 120 feet (24.38 to 36.6 meters) worldwide. Heaphy and the other individual solicited stock investors ahead of a planned IPO. They informed investors that the money would develop and support business operations. In addition, they claimed they received stock themselves for recruiting investors.
However, the U.S. Attorney cites Heaphy’s own court testimony and court documents as proving otherwise. Heaphy received $307,658 directly from $1.3 million paid by investors. The other individual took direct payments, too. Therefore, The Waters Club didn’t have funds to develop the fractional-ownership club. It did not pursue an IPO, either. Furthermore, the investors’ shares were worthless.
Heaphy’s guilty plea carries a maximum imprisonment of 20 years. The U.S. Attorney’s office says both the FBI and IRS are conducting an ongoing investigation, too.
Interestingly, the U.S. Attorney notes that Heaphy had already pled guilty to an unrelated stock scheme last summer. But, that scheme involved at least six Waters Club investors. The office terms it a “pump and dump” scheme. Heaphy convinced investors to purchase securities in companies with essentially no legitimate business activities. Once the share prices artificially inflated, individuals working with him sold their pre-existing shares, at profits. Following this, they let the securities’ price drop. Investors lost millions. Heaphy learned federal authorities were investigating him for this in mid-2016. He then started to sell Waters Club shares.
Heaphy is not the only person related to The Waters Club facing criminal charges. The president and CEO, Andrew Demme, was charged with investment fraud last November.
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