• August 16, 2023
• iCap Northwest Opportunity Fund, LLC

The Wolper Law Firm represents investors around the country who have lost money in complex investment strategies and products, including private placements. The iCap Northwest Opportunity Fund, LLC is a recent example of a private placement “gone bad” with the issuer reporting that it can no longer meet its dividend obligations to investors.

The Wolper Law Firm has extensive experience litigating private placement cases. If you have experienced investment losses due to the iCap Northwest Opportunity Fund, LLC, please contact the Wolper Law Firm, P.A. for a free consultation. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.

What is the iCap Northwest Opportunity Fund, LLC?

Private placements is a broad term that describes securities that are not offered for sale through a public exchange. These can include promissory notes, private equity offerings, small, start-up businesses, etc. Private Placements are issued under Regulation D under the Securities Act of 1933. Regulation D provides exemptions from the more rigorous Securities and Exchange Commission (SEC) registration requirements and allows companies to offer and sell securities without extensive disclosures. The absence of standard disclosure requirements often creates.

The Securities Exchange Commission, federal courts, and FINRA have all found that brokerage firms have a duty to conduct a reasonable investigation concerning the private placements issuer’s representations concerning the security. A brokerage’s firm’s due diligence obligation also stems from suitability obligations requiring the broker to have reasonable grounds to believe that a recommendation to purchase, sell or exchange a security is suitable for the customer. In order to meet the due diligence obligation, the brokerage firm and/or financial advisor must make reasonable efforts to gather and analyze information about the private placement, the issuer and its management, the business prospects of the issuer, the assets held by or to be acquired by the issuer, the claims being made by the issuer in the offering materials, and the intended use of proceeds of the offering. The failure to determine this and other material information would necessarily preclude a financial advisor from disclosing to a customer the material aspects of a transaction.

Private placements have increased in popularity over the years as investment professionals attempt to capitalize on volatility experienced among publicly trades securities. Private placements are often marketed and sold as safe and stable income producing vehicles that are not subject to the same market forces as publicly traded securities. While there is some level of truth to that statement, the reality is that private placements are speculative and do not have the same reporting requirements as publicly traded securities. This means that private placements can often mask financial difficulties until it is too late. Moreover, because private placements are illiquid, investors are often unable to sell their interests to third-parties before experiencing an investment loss.

According to SEC Filings, the iCap Northwest Opportunity Fund, LLC looked to raise $50,000,000 in capital from retail investors. The fund actually raised more than $47,000,000, which produced total sales commissions of more than $5.4 million for promoters, brokerage firms and financial professionals.

The iCap Northwest Opportunity Fund, LLC is a private placement that owns assets in the real estate sector. It purchased a significant portion of its holdings using borrowed capital at varying interest rates. In the face of the rising investment rate environment, iCap Northwest Opportunity Fund, LLC no longer has the financial ability to meet its dividend obligations to investors. iCap Northwest Opportunity Fund, LLC borrowing costs have risen and there is no longer accessible cash to pay dividends. This is common with investments that overleverage their underlying holdings and fail to adequately manage their balance sheet.

In March 2023, the CEO of iCap Northwest Opportunity Fund, LLC informed investors that “it appears that interest rates are on track to continue rising which means things will likely worsen in the near term.” The CEO further advised that “the current situation has impacted the real estate portfolio that iCap manages and therefore our ability to return capital to investors under the time frame originally proscribed in our disclosure documents. We are writing to inform you that at this time we are not able to continue making monthly interest payments.”

The absence of dividends is devastating for retail investors, who rely on the income stream. Because the iCap Northwest Opportunity Fund, LLC is illiquid, investors are unable to exit the investment and sell their interest to the issuer or a third party.

What Can I Do to Recovery My Losses in the iCap Northwest Opportunity Fund, LLC?

Investors who invested in the iCap Northwest Opportunity Fund, LLC through brokerage firms or financial professionals have the ability to bring a FINRA arbitration claim to recover their losses. FINRA Notice to Members 10-22 provides specific requirements that brokerages and financial professionals must undertake when conducting due diligence on privately held securities, before recommending them to investors. Moreover, the FINRA suitability rule requires that brokerages and financial professionals make both reasonable basis and customer specific suitability determinations prior to recommending securities to customers.

According to SEC filings, the following brokerage firms receives compensation for the sale of the iCap Northwest Opportunity Fund, LLC and have the aforementioned due diligence and suitability obligations:

• Titan Securities
• Claraphi Advisory Networks, LLC
• Ausdal Financial Partners, Inc.
• Advisory Group Equity Services, Ltd.
• Bradley Wealth Management, LLC
• Center Street Strategies Securities, Inc.
• Chauner Securities, Inc.
• Freedom Investors Corp.
• Gardner Financial Services, Inc.
• IBS Financial Services, Inc.
• Meyers Associates, LP
• Pariter Securities, LLC
• Stillpoint Capital, LLC
• Wall Street Strategies, Inc.

These due diligence obligations are absolute but are often overlooked by brokerage firms because they don’t have the resources or infrastructure to effectively conduct due diligence. It is often passed along to third-parties, who fail to meet the exacting standards of FINRA Notice to Members 10-22.

The Wolper Law Firm, P.A. Offers Free Consultations to Discuss Losses in the iCap Northwest Opportunity Fund, LLC

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled more than 1,000 securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.