Vendor Accused by Jefferies of Fraud Faces Forced Bankruptcy

A water vending machine business accused by a Jefferies Financial Group Inc.hedge fund of orchestrating a large Ponzi-like scheme may be forced into bankruptcy.

Creditors of WaterStation Management and two affiliates filed involuntary bankruptcy petitions against the companies on Aug. 27 in Texas. Jefferies’ 352 Capital fund isn’t involved in the bankruptcy filings but last month accused a former portfolio manager, WaterStation and its founder of misappropriating more than $100 million in company bonds as part of a “massive fraud.”

The petitions were filed days after a Washington state judge appointed a receiver to manage WaterStation. It couldn’t immediately ...