Fort Lauderdale businessman gets prison time for defrauding investors in charter firm - Trade Only Today

Fort Lauderdale businessman gets prison time for defrauding investors in charter firm

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A Fort Lauderdale businessman who headed Waters Club Holdings Inc. has been sentenced to 18 months in federal prison for fraud. Andrew Deme was also ordered to repay $1.289 million for defrauding a dozen investors. Deme pleaded guilty in March to a count of conspiracy to commit mail and wire fraud. Deme was ordered to report to prison on July 12, according to the Sun-Sentinel.com.

Deme was president, chief executive officer and chief financial officer of Waters Club Holdings Inc., a membership-based club that sought to access yachts for members to share in some highly sought-after cruise regions. Deme hired two men from the New York area, Thomas Heaphy Jr. and Brian Ferraioli, to find investors to buy shares in the company. They secured 12 investors. Heaphy Jr. and Ferraioli pleaded guilty and were sentenced earlier this year to six years for their roles in the case and an unrelated investment-fraud scheme, according to the U.S. Attorney.

According to the government’s sentencing memorandum, Deme and his promoters “falsely told the victim Investors that their money was being used to develop the business, and fund the operations, of Waters Club; and that the promoters were being compensated with stock, rather than commissions, for recruiting investors.” Prosecutors said that about half, or $605,204 of all money paid by the victim investors for shares of Waters Club were actually paid to the promoters as sales commissions.” Partly because of that, the business lacked the money to develop the club, and the shares acquired by investors were unsellable.

Deme’s attorney had argued for house arrest, probation or a combination. He said the Waters Club was not a scam, and except for the fraudulent sales commissions, had “recurring revenues, a continual flow of new customers and guaranteed contractual business well into the year 2019.”

Waters Club Holdings continues to operate as a charter company, according to an SEC filing. The filing was signed by the new CEO, James James, a 25-year yacht industry veteran who served as general manager of Yacht Chandlers of Fort Lauderdale. After Deme resigned in 2017, Waters Club entered into a charter contract with one of its yacht charter vendors and holds an option to purchase a yacht before the end of September. Because of last year’s hurricane season, the company suspended its charters in the U.S. Virgin Islands and moved them to the Bahamas. “The company hopes to restart its Virgin Islands charter operations before the end of 2018, conditions permitting,” the filing said.

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