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iCap Equity Files for Bankruptcy

The Chief Executive Officer of iCap Equity, a Bellevue-based equity fund, announced his departure from the company in a letter sent to investors last month. This marks the latest in a series of challenges for the alternative investment firm, whose offerings include the iCap Vault I LLC, the iCap Pacific Income V LLC, and the iCap Pacific Northwest Opportunity and Income Fund. Investors in any of these offerings may be able to bring a claim for damages through the Financial Industry Regulatory Authority.

As described in iCap Equity’s letter to its investors regarding its CEO’s resignation, that particular move came in the wake of the difficulties it experienced trying to expand the firm’s real estate portfolio. In March, the now-departing CEO informed investors that rising interest rates were adversely impacting its operations, resulting in the company’s decision to suspend monthly interest payments to investors. This is one of the many risks associated with investments in risky private placements, which come with no assurance that investors will receive distributions.

As Paladin Management Group, which is overseeing iCap’s business decisions, explained in a September 29 letter to investors, the bankruptcy filing aims to fulfill two “primary objectives”: “First, to safeguard the Company’s assets while enabling a comprehensive and independent assessment of the Company’s assets and liabilities. Second, to maximize value for all stakeholders, including iCap’s investors, and expedite any potential recoveries to creditors.” To achieve these goals, it will undertake an assessment of its real estate holdings, investigate and evaluate legal claims against the company, and develop a liquidation plan for its remaining assets.

iCap Equity is what’s known as a Regulation D private placement, meaning it is exempt from registration with the Securities and Exchange Commission. Such investments can come with significant risks. The companies that offer them are not required to provide investors with the same level of transparency as publicly registered securities, making it difficult for investors to keep track of their investments’ performance. They are often also illiquid investments, meaning that investors who wish to sell them may face challenges finding a buyer, let alone a buyer willing to pay a fair price.

These factors combine to make Reg D private placements unsuitable for many unsophisticated and/or conservative investors. Suitability, investors should be aware, is a standard under which brokers must recommend investments that are appropriate for a customer’s profile, including their experience and risk tolerance. Investment advisors are similarly beholden to Regulation Best Interest, which stipulates, among other things, that they must recommend investments in a customer’s best interest.

Carlson Law represents investors throughout the United States in claims against financial advisors and investment firms. If you or a loved one have suffered investment losses, please call us at 888-976-6111 or complete our contact form for a free and confidential consultation.

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