Exec pleads guilty in fraud case

A Fort Lauderdale businessman who started a yacht sharing club for vacationers faces up to 20 years in prison after he pleaded guilty Thursday in a Connecticut federal court to conspiring to commit fraud against investors.

Andrew Deme, who was president, CEO and CFO of the Waters Club Worldwide, admitted that he and two promoters he hired misled investors when they said that money raised would be used to develop and fund the business and that the promoters were not being paid. A federal grand jury charged Deme, 52, in November 2017. The business plan envisioned membership-supported club that had access to a fleet of yachts that members could use for cruising to vacation destinations.

One of the investors was a Connecticut resident who lost $475,000, the government said in a statement Thursday. At least a dozen people were recruited and paid out more than $1.29 million for shares of Waters Club stock that could not be resold.

“In truth, Deme knew that approximately half of all the money paid by investors for shares of Waters Club was paid to the promoters as sales commissions,” according to the statement by U.S. Attorney John H. Durham. “Due in part to the payments to promoters, which totaled approximately $605,204, Waters Club lacked the capital to develop its membership-based club, did not pursue an IPO (initial public offering), and the shares purchased by investors were unsalable.”

The two Waters Club promoters, Thomas Heaphy Jr. and Brian Ferraioli, both of New York, have also pleaded guilty in the case. The government said Heaphy gained $307,658, while Ferraioli received $297,546 for their sales efforts.

The three defendants remain free on bond while they await their sentencings. Deme is scheduled to appear in court for his sentence on June 7.

The Waters Club remains in business in Fort Lauderdale under new management, a government spokesman said.

James James, who is listed as the CEO of the company on its website, was unavailable for comment on Thursday.