State financial agency takes action against water vending machine maker for fraudulent securities offering

Be careful if you’re considering getting into the vending machine business.

Water Station Management and its representatives are being charged with securities violations for how they operated a company offering and selling water vending machines that were serviced and managed by them for a fee. Nationwide, at least 171 investors spent more than $129 million on this investment.

The Washington State Department of Financial Institutions, or DFI, alleges that to help sell its investment, Water Station misled its investors. It funneled at least 70 individuals toward small business loans while failing to tell them that using the loans to buy Water Station investments would violate federal guidelines. 

In addition, DFI asserts that Water Station also executed an egregious scheme to defraud investors by misleading them about the number and location of the water vending machines. The company sold investors thousands of machines that either didn’t exist or didn’t exist in the places the company said they were located. Of the nearly 15,000 machines investors purchased, only about 6,000 existed. More than half the machines that did exist were in a warehouse, not earning revenue. 

“Water Station raised hundreds of millions of dollars from investors and banks before ultimately being forced into involuntary bankruptcy proceedings late last year,” William Beatty, director of DFI’s Division of Securities, said in a statement.

Beatty said investors have been left to shoulder the burden for Water Station’s fraud and financial mismanagement.

DFI’s order requests that Water Station, and its founder Ryan Wear, stop violating securities laws, pay a fine, and pay costs related to the investigation.

DFI is the first state regulator to take public action against Water Station for violating state securities laws.