John H. Durham, United States Attorney for the District of Connecticut, today announced that ANDREW DEME, 52, of Fort Lauderdale, Florida, was sentenced yesterday by U.S. District Judge Jeffrey A. Meyer in New Haven to 18 months of imprisonment, followed by three years of supervised release, for defrauding investors in a yacht sharing club.
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."
Promoters that DEME hired, including Thomas Heaphy, Jr. and Brian Ferraioli, 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 Heaphy and Ferraioli as sales commissions. Due in part to these payments, Waters Club lacked the capital to develop its membership-based club, did not pursue an IPO, and the shares purchased by investors were unsalable.
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. One of the victims of this investment scheme was a Connecticut resident who invested $475,000 in Waters Club.
Judge Meyer ordered DEME to pay restitution in the amount of $1,289,500.
DEME was arrested on December 5, 2017. On March 15, 2018, he pleaded guilty to one count of conspiracy to commit mail and wire fraud.
DEME, who is released on a $100,000 bond, was ordered to report to prison on July 12, 2018.
Heaphy, of East Moriches, New York, and Ferraioli, of Sayville, New York, previously pleaded guilty to the same charge. On May 7, 2018, they were each sentenced to 72 months of imprisonment for their roles in this scheme and an unrelated investment fraud scheme.
This investigation was conducted by the Federal Bureau of Investigation and the Internal Revenue Service - Criminal Investigation Division. The case was prosecuted by Assistant U.S. Attorney Avi M. Perry.
Source: U.S. Department of Justice, Federal Bureau of Investigation (FBI)
