Tobias Ritesman arrested on wire and mail fraud charges, makes first appearance in federal court

Two top executives of Global Aquaponics are facing 18 counts each of wire and mail fraud following their indictments by a federal grand jury.

CEO Tobias Ritesman and Timothy Burns, the company's chief operating officer, were indicted in connection with a scheme that involved raising money for a high-tech fish farm in Brookings. Federal prosecutors say Ritesman and Burns misled potential investors about the viability of the project.

Ritesman appeared in federal court Wednesday, escorted into the courtroom by a U.S. marshal. He was wearing a black T-shirt, blue jeans and handcuffs.

Assistant U.S. Attorney Annie Hoffman read the six-page indictment against Ritesman and Burns. Beginning on May 3, 2016, the two devised a scheme to defraud and obtain money and property from others "by means of false and fraudulent pretenses."

Potential investors were told that a nearly $11 million fish farm would be built in Brookings to grow fish and shrimp. The water from the fish tanks would be circulated to other tanks growing vegetables. Ritesman billed the facility as a model that could be used to eradicate world hunger.

A private placement memorandum to potential investors indicated that Global Aquaponics had $5.6 million in cash, which was not true, Hoffman said. The memorandum sought to raise an additional $5.4 million from investors.

"The PPM contained false and misleading information," Hoffman said.

The money raised from investors was deposited into accounts that both Ritesman and Burns controlled.

"Each defendant used investor funds for his own purposes and to his own benefit rather than for the aquaponics facility," Hoffman said.

Burns' hearing had not been scheduled Friday afternoon.

Tuesday's indictments come after an extensive Argus Leader investigation that unveiled a pattern of questionable activity by Ritesman and Burns. The investigation showed that in 2016, company officials held a groundbreaking for the Brookings facility on land they didn't yet own.

Then, in an unusual string of transactions, lobbyist and former state Legislator Dean Krogman traded a house in Brookings worth $175,000 for the land, and then transferred it to Global Aquaponics for a token payment of $1.

In the months after news broke of the uncertainty of the Brookings project, some local investors in Global Aquaponics, who had bought units in the project valued at $25,000 each, clamored for additional information but got few answers from Ritesman. Meanwhile, Global Aquaponics continued to seek investors, even as company officials admitted they were interviewed by the FBI.

In August, a former employee of Ritesman, Gregg Selberg, sued Ritesman and Global Aquaponics, claiming the CEO and others misrepresented the viability of the company. Global Aquaponics was a "sham corporation," Selberg said in his suit. A judge awarded Selberg nearly $400,000 in a judgment last month.

Ritesman portrayed himself to investors as a jet setting, wealthy businessman who consulted with large corporations and governments as a security expert. But on Wednesday, Magistrate Judge Veronica Duffy said it appeared Ritesman didn't have enough money to pay for a lawyer.

"I'm going to assume that you do qualify for a court-appointed lawyer," she said.

Ritesman was released on a personal recognizance bond, but he is not allowed to travel outside of the state without permission, and Duffy ordered him to turn over his passport. The decision to release Ritesman was not opposed by the U.S. Attorney's Office.

"This is a white collar case, and he doesn't have a criminal history," Hoffman said.

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