EVERETT — An Everett-based company accused of being a Ponzi scheme is now facing a lawsuit in federal court.
The suit was filed in April through Snohomish County Superior Court, later amended in June and moved to federal court in August.
The plaintiffs accused WaterStation Technology, based in Everett, of fraudulently raising $130 million from investors. The company advertised itself as providing single-use vending machines which dispensed filtered drinking water.
The amended complaint filed in June added more than 100 additional plaintiffs and named Unibank and First Fed Bank as additional defendants, accusing them of playing a role in enabling WaterStation Technology’s fraud.
It alleged the banks issued close to 90 separate loans to Wear and WaterStation, without adhering to “basic underwriting practices,” the complaint said.
Both were later dismissed without prejudice from the federal lawsuit, with a new lawsuit later filed against First Fed Bank of Port Angeles in King County.
According to the amended complaint, WaterStation promised investors returns ranging from 12 percent to 20 percent and convinced the plaintiffs to take out loans to invest into the business.
Ryan Wear, who lives in Snohomish County, was listed as WaterStation Technology’s owner along with more than 50 other LLCs named in the complaint.
Wear told investors to obtain loans from regional banks who had ties to WaterStation, which paid the funds directly to the company. These loans were used by WaterStation to purchase machines, which the company would then install and service, sending monthly revenue payments back to investors in exchange for a share of the profits.
After WaterStation stopped making monthly revenue payments to the investors, the lenders still intended to collect on the original loans made to plaintiffs.
More than 90 percent of the machines sold to investors did not exist, plaintiffs alleged.
Wear said in a response filed in May that he has a spreadsheet with more than 17,000 lines, showing the location and status of the water machines by serial number but said the information was highly proprietary and would only share it subject to protection for the information. Attorneys for Wear did not respond to an email seeking comment.
Ponzi schemes are a form of investment fraud that pays existing investors with funds collected from new investors, according to the Securities and Exchange Commission. The plaintiffs allege that the actions WaterStation took fell under that definition.
WaterStation Technology was founded in 2013, and payments to investors reportedly stopped in 2022. Court filings said that three of Wear’s LLCs are undergoing involuntary bankruptcy in Texas, leading to a stay in WaterStation’s civil case.
John Bender, a partner at law firm Corr Cronin, who is representing the majority of the plaintiffs, said the bankruptcy proceedings may clear up many of the remaining questions of the case.
“I think the right process has now begun, i.e., the bankruptcy proceedings, because that is going to answer the key questions that you and everyone else is asking in terms of what happened here,” Bender said. “Where are the assets, and what is going to be left, if anything, for the victims?”
A joint motion to remand the case back to Snohomish County also was filed, with a number of plaintiffs and defendants supporting the move back to the county superior court. One plaintiff filed a motion to keep the case in federal court. That decision is still pending.
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Will Geschke is a reporter for the Everett Herald, a Sound Publishing publication and sister paper of Peninsula Daily News. Geschke can be reached at 425-339-3443 or by email at william.geschke@heraldnet.com.
