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Embattled Bellevue-based investment firm iCap could be facing its end after a federal judge in the Yakima bankruptcy court ruled the company’s former leaders defrauded investors of $230 million in a multi-year Ponzi scheme.
First reported by The Seattle Times on Friday, Chief Judge Whitman Holt said in an Oct. 15 ruling “there is substantial, if not overwhelming, evidence” that iCap used investors’ money to repay other investors, instead of paying them monthly interest payments from multiple real estate development projects in the Greater Seattle Area.
Investors’ attorneys said former iCap leaders Chris and Jim Christensen repeatedly assured investors that the developments they’d invested in were “actively generating profits.” However, an independent audit of iCap’s records revealed the company only earned $1.4 million in profits from 2013 to 2022 — meaning the Christensens were $228.6 million short of what they promised to pay investors.
“They would have been better off just putting the money in Treasury bonds and letting it sit there,” Holt said of iCap’s low rate of return.
A restructuring firm took over iCap last year and began selling off the company’s portfolio. As of October, the firm has sold 15 properties for $19 million and is working on selling the rest. However, the majority of the sales proceeds have gone toward bankruptcy proceedings, meaning none of the investors have been repaid.
The Seattle Times said Holt’s ruling provides the groundwork for future lawsuits against the Christensens and other entities involved in the scheme. Investors may be able to get a tax deduction for the monies they invested in iCap, the article said.
Jim Christensen declined to comment on the ruling. Chris Christensen told The Seattle Times he “strongly disputes the allegation that iCap operated as a Ponzi scheme.”
