Source: United States Attorneys General
Headline: New York Man Pleads Guilty to Conspiracy Charge Related to Investment Fraud Scheme
John H. Durham, United States Attorney for the District of Connecticut, today announced that THOMAS HEAPHY, Jr., 43, of East Moriches, N.Y., waived his right to be indicted and pleaded guilty yesterday before U.S. District Judge Jeffrey A. Meyer in New Haven to a conspiracy charge stemming from an investment fraud scheme.
According to court documents and statements made in court, this scheme involved the promotion and sale of securities of Waters Club Worldwide, Inc. and Waters Club Holdings, Inc. (collectively, “Waters Club”), which provided yacht charter services to customers. From approximately August 2016 to February 2017, HEAPHY and another promoter solicited prospective investors to purchase shares of Waters Club stock purportedly in advance of an initial public offering (“IPO”). According to HEAPHY and his co-conspirators, Waters Club intended to form a membership-based “time share” club with a fleet of yachts that members jointly owned and could use for yachting vacations.
In pleading guilty, HEAPHY admitted that he and his co-conspirators made certain misrepresentations to prospective investors in Waters Club, including that investors’ money would be used to develop the business and fund the operations of Waters Club, and that HEAPHY and his co-conspirators were being compensated with stock for recruiting investors. In truth, HEAPHY received approximately half of all the money he induced investors in Waters Club to invest. Due in part to the payments to HEAPHY and the other promoter, Waters Club lacked the capital to develop its membership-based club, Waters Club did not pursue an IPO, and the shares purchased by investors were unsalable.
HEAPHY and the other promoter recruited at least 12 investors to pay a total of at least $1,289,500 for shares of Waters Club stock. One of the victims of the Waters Club scheme was a Connecticut resident who paid $475,000 to Waters Club. HEAPHY’s total gain from this scheme was $307,658.
HEAPHY pleaded guilty to one count of conspiracy to commit mail and wire fraud, an offense that carries a maximum term of imprisonment of 20 years.
On July 28, 2017, HEAPHY pleaded guilty in New Haven federal court to one count of conspiracy to commit mail and wire fraud and one count of tax evasion stemming from his role in an unrelated stock “pump and dump” scheme. In that scheme, between approximately 2011 and July 2016, HEAPHY and others induced investors to purchase securities in shell companies with virtually no legitimate business activities. After the share price of the securities became artificially inflated, certain of HEAPHY’s co-conspirators sold their own preexisting positions in the securities at a profit. They then allowed he price of the securities to fall, leaving investors with worthless and unsalable stock. As a result, victim investors lost millions of dollars.
HEAPHY began to sell Waters Club securities after he learned that he was under federal investigation for the stock pump and dump scheme in the summer of 2016.
At least six Waters Club victim-investors have also been identified as victims of the earlier stock pump and dump scheme.
A sentencing date has not been scheduled.
This investigation is being conducted by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation Division. The case is being prosecuted by Assistant U.S. Attorney Avi M. Perry.