iCap Equity Described as “Ponzi Scheme”

There is “overwhelming evidence” that iCap Equity was operating a Ponzi-scheme, according to Paladin Management Group, the firm appointed by a bankruptcy court to oversee iCap’s operations. As Bisnow reported in February, Paladin alleged that the funds iCap raised from investors “were almost 10 times greater than revenues from real estate activities,” a potential sign of fraudulent activity.

According to the report, account Jeffrey Kinrich, who was hired to conduct a review of iCap’s records, offered the same assessment. “This is highly indicative of a Ponzi scheme,” he reportedly wrote in court filings, noting that iCap’s properties did not generate enough returns to repay investors.

As investors may be aware, iCap Equity is a Regulation D private placement, which means it’s exempt from registration with the Securities and Exchange Commission. Per the Seattle Times, iCap purported to be a real estate investment firm that “raised money promising to invest in Seattle-area real estate projects.” Paladin Management’s Chief Restructuring Officer told the Times that his firm has asked the court to recognize its conclusion that the company operated a Ponzi scheme, arguing that such a recognition “will materially expedite and support our ongoing efforts toward a favorable outcome.”

Bankruptcy filings reportedly note that “iCap owes 1,800 investors a total of $250 million,” with its investors largely including “Chinese citizens and Chinese Americans.” The company, its CEO Chris Christensen, and other related entities already face lawsuits from “multiple parties,” according to Bisnow. Christensen has denied the allegations that iCap ran a Ponzi scheme, according to the Times, with his attorneys saying in a statement that he will “submit his evidence and argument to the Court at the appropriate time.”

One investor interviewed by the Times said she relocated from China to Washington in 2015, investing $1 million in savings in iCap partly due to its “promise of high interests.” She intended to use the money “to pay college tuition for her two children,” but has yet to make any back.

Bisnow also notes that two investors have also filed lawsuits against a broker-dealer, Somerset Securities, in connection with their investments in iCap Equity. They allege that the firm breached its fiduciary duty to act in their best interests.

More information about the alleged Ponzi scheme iCap Equity is available vis Bisnow and the Seattle Times.

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