Washington Department of Financial Institutions Takes Action Against iCap and Founders Over Ponzi Scheme

OLYMPIA – The Washington State Department of Financial Institutions (DFI) filed a Statement of Charges against Bellevue, WA-based iCap and its founders, brothers Chris and Jim Christensen, for a host of violations of the Securities Act between 2013 and 2023. This order follows a nearly two-year investigation. DFI is the first government agency to take public action against iCap and the Christensens for defrauding investors.

DFI asserts that iCap and the Christensens raised at least $250 million from more than 1,800 investors – 58 of whom are Washington State residents - by selling notes and unsecured bonds (known as debentures) in related companies. iCap said the money raised would be invested in real estate by these companies. The investments required iCap to make monthly payments to investors, regardless of whether the underlying real estate projects were profitable.

DFI further alleges that when iCap failed to generate consistent revenue from its underlying real estate ventures, it abandoned its legitimate business operations and began to run a Ponzi scheme. The company failed to deploy investor funds to legitimate business operations and relied on new investors to cover its payment obligations to existing investors. 

“We must root out bad actors who use deception and fraud to take Washington investors’ money,” DFI Director Charlie Clark said. “When we see such clear fraud, DFI will use every tool at its disposal to keep dishonest players out of the financial industry.”

iCap’s investments were not registered in Washington State. DFI alleges that to evade Washington registration requirements — and DFI scrutiny — iCap largely relied on safe-harbor exemptions available under federal law. These exemptions allow companies to raise unlimited amounts of money without oversight by state or federal regulators. On the one occasion where iCap attempted to register in Washington, DFI rejected its application after determining the company could not make the required payments to investors. Undeterred, iCap withdrew its application and sold its investments under a federal exemption.

“Unfortunately, with Ponzi schemes, the harm isn’t discovered until the fraud collapses, and it becomes apparent that investors have lost their money,” DFI Acting Securities Division Director Faith Anderson said. “Actions like this Statement of Charges help keep bad actors out of the industry.”

According to DFI, iCap and the Christensens spent years disseminating false and misleading information about the company’s profitability and operations. In 2023, the company stopped making payments to investors and filed for bankruptcy. Currently, a pair of co-trustees in federal bankruptcy court are coordinating and resolving claims on behalf of creditors of the company, including any investors who filed creditor claims to recoup assets lost as part of the scheme.

The Statement of Charges announces DFI’s intent to order iCap and its founders to cease and desist from violations of the Securities Act, to pay a fine, and to pay costs related to the investigation. The action also seeks to bar the Christensens from registering with DFI in any capacity in the future. DFI will order restitution only if iCap’s debts are not discharged as part of the bankruptcy proceedings. 

Under the Securities Act, DFI has the authority to refer matters to local and federal prosecutors to pursue any criminal violations as well as assist with prosecution as requested. It is not uncommon for federal law enforcement to separately investigate instances of securities fraud for potential criminal prosecution.

What is a Ponzi Scheme?
In a Ponzi scheme, earlier investors are repaid through the funds deposited by subsequent investors and the underlying investment claims are usually entirely fictional; very few, if any, actual physical assets, or investments generally exist. As the number of total investors grows and the supply of potential new investors dwindles, there is not enough money to pay off promised returns and cover investors who try to cash out.

A Ponzi bubble will burst when the con artist simply cannot keep up with the payments investors are expecting to receive.

When the scheme collapses, investors may lose their entire investment in the fraud. In many cases, the perpetrator will have spent investment money on personal expenses, depleting funds and accelerating the bursting of the bubble.

Ponzi schemes are named after 1920’s swindler Charles Ponzi. Charles Ponzi took investors for $10 million by promising 40 percent returns from arbitrage profits on International Postal Reply Coupons.

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