More Bad News for Investors, iCap Files Chapter 11, Lawsuits Pending
The White Law Group continues to investigate securities fraud claims involving iCap Equity, LLC offerings. Our firm has received numerous calls from investors in iCap Equity looking to recover their investment. If you have suffered losses, we may be able to file a FINRA Dispute Resolution claim against your brokerage firm. Our firm is currently representing investors in claims against their brokerage firms for allegations of unsuitable recommendations in iCap Equity offerings. See: FINRA Claim Filed against Ages Financial Services LTD and Somerset Securities Inc.: FINRA Claim.
Update on October 26, 2023 – Multiple Lawsuit Pending against iCap Equity
According to the Seattle Times on October 25, iCap Equity, based in Bellevue, Washington, has found itself entangled in at least six civil lawsuits in King County, Washington. The litigants in some of these cases have also named the former CEO and his brother, the company’s Chief Operating Officer. In a subsequent development, during August and September, a King County judge reportedly issued an order to freeze iCap accounts, preventing property sales and the use of investor funds. Not long after, the company filed for Chapter 11 bankruptcy, and the CEO resigned from his position. The company is currently under the management of a third-party group, Paladin.
The exact number of investors who purchased promissory notes from iCap and the total debt owed by the company remain unclear, according to the Seattle Times article. However, bankruptcy filings have listed more than 2,700 individuals and entities as creditors, with total financial liabilities falling within the range of $100 million to $500 million. Additionally, iCap reportedly has unpaid payroll taxes of nearly $196,000 to the IRS and property taxes of $11,000 to Snohomish County for a property in Lynnwood. The largest debts are owed to investors, with amounts ranging from over $3 million to as much as $10.5 million per creditor, as stated in court documents. iCap’s creditors span multiple states and countries, including Washington state and China.
Notably, lawsuits in King County allege that iCap executives enticed investors by making “very safe” claims about their investment opportunities, promising to acquire and develop land across Washington.
One specific lawsuit filed in King County Superior Court illustrates iCap’s promise to develop a site in Kenmore into five senior-care homes. However, as of October 5, the project reportedly remains unfinished, highlighting the investors’ dissatisfaction.
The situation has also drawn the attention of Chinese investors, who have reportedly filed a lawsuit during the summer. They allege that iCap specifically targeted Chinese immigrants and Chinese nationals in their marketing efforts. According to this case, a group of 28 investors, many of whom do not speak English, invested more than $17.5 million and have yet to receive full repayment.
Update on October 2, 2023 – iCap Equity and Affiliates file Chapter 11 Bankruptcy
According to public records on September 29, 2023, iCap Equity, LLC and its affiliates have filed a voluntary petition for Chapter 11 bankruptcy protection in the United States bankruptcy court in the Eastern District of Washington.
Update on September 13, 2023 – iCap CEO Steps Down
According to a letter to investors on September 12, 2023, iCap Equity, after “facing the hard reality of increasing challenges” is making a strategic shift. The company notes that its plan to expand its real estate portfolio fell through and market conditions continue to decline. This follows the company’s disturbing news in March that it would not be able to make interest payments to investors.
The company has brought in Paladin Management Group, an advisory and consulting firm experienced with restructuring, and the current CEO will be stepping down, according to the letter.
iCap Equity Halts Payments to Shareholders
According to a letter to investors on March 20, 2023, iCap Equity LLC halted monthly interest payments to its shareholders blaming the “monumental challenges” for the real estate capital markets due to rising interest rates and inflation.
The real estate sector is struggling to respond to the “unprecedented speed” with which interest rates are rising as inflation continues to increase, according to the company. The current global economic environment has also impacted and severely restricted lending options that have resulted in fewer transactions in the market, according to the letter. The company further notes that it seems that interest rates will continue rise in the near future, meaning “things will likely worsen.”
iCap Equity went on to say that quite a few other notable and sophisticated real estate investment firms have recently announced that they are suspending payments to investors or that they have defaulted on their loan obligations.
According to the company, its goal remains to do what is in the best interest of the investors and its full attention has been turned to “the preservation of your capital.”
iCap Equity notes that it is preparing a detailed report to provide information regarding the state of our portfolio, the impact of recent economic conditions on the portfolio, and a proposed plan for how to move forward. The company will reportedly reach out to set up a call to present this plan in the next few weeks.
The Risks of Alternative Investments
Private Placements under Regulation D are typically sold by brokerage firms in exchange for a large up-front commission. High commissions can range from 7-10%, as well as additional “due diligence fees” that can range from 1-3%. In this offering, the filing indicates that the sales commissions and fees were estimated at 6% of the total offering amount.
The problem with private placement investments such as Icap Equity is that they typically involve a high degree of risk. They are often sold as unregistered securities which lack the same regulatory oversight as more traditional investment products like stocks or bonds. They also tend to be illiquid and when ready to sell, it is often difficult to find a buyer. Although you may be able to sell these investments through a secondary market, it may be at a financial loss.
iCap Equity LLC
iCap Pacific Northwest Opportunity and Income Fund
iCap Pacific Income V LLC
iCap Vault I LLC
ICAP Equity Income Fund (ETF)
FINRA Claims to Recover iCap Equity Losses
Broker dealers are required to perform adequate due diligence on any investment they recommend. They must ensure that all recommendations are suitable for the investor. Firms that fail to do so, may be held responsible for any losses in a FINRA arbitration claim.
FINRA Dispute Resolution is an arbitration venue for investors with claims against their brokerage firm or financial professional. It provides investors with an opportunity to attempt to recoup their investment losses and is an alternative to filing such claims in court. To learn more, please see: Regulation D Private Placement Fraud Attorneys
How to Recover Investment Losses
If you have concerns regarding your investment in iCap Equity and would like to speak with a securities attorney about your options, please call The White Law Group at 888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.
For more information on The White Law Group and its representation of investors in FINRA arbitration claims, visit https://www.whitesecuritieslaw.com.
Tags: ICap Equity, private placement investments Last modified: November 9, 2023