A former executive at a yacht sharing club has been sentenced to time behind bars in district court in Connecticut.
John Durham, the United States Attorney for the District of Connecticut, announced on Friday that Fort Lauderdale resident Andrew Deme, 52, has been sentenced to 18 months in prison, followed by three years supervised release after pleading guilty to defrauding investors in the yacht sharing club.
Durham said that according to court documents and statements made in court, Deme was the president and sole director of Waters Club Worldwide, which merged with Petrus Resources Corporation to form Waters Club Holdings, Inc., where he became president, CEO and CFO of the newly formed company.
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 Long Island residents Thomas Heaphy, Jr. and Brian Ferraioli - who were sentenced for investment fraud schemes earlier this month in New York - “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 reality, Deme pleaded guilty to knowing 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.
In total, Heaphy and Ferraioli recruited at least a dozen investors, who paid more than $1.5 million for shares of Water Club stock. One of the victims of that scheme was a Connecticut resident who made a $475,000 investment.
Deme was arrested in Demeber last year and pleaded guilty to one count of conspiracy to commit mail and wire fraud on March 15. He remains out on $100,000 bond and is due to report to prison on July 12. In addition to his prison sentence, Deme was also ordered to pay $1,289,500 in restitution to his victims.
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