1 2
3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE
9 10 LANCE MILLER, et al., CASE NO. C25-1870JLR 11 Plaintiffs, ORDER v. 12 COLUMBIA BANK f/k/a UMPQUA 13 BANK, 14 Defendant. 15 16 I. INTRODUCTION 17 Before the court is Defendant Columbia Bank’s (“Columbia” 1) motion to dismiss. 18 (MTD (Dkt. # 23); Reply (Dkt. # 27); see also Compl.) Plaintiffs Lance Miller and Seth 19 Freeman oppose the motion. (Resp. (Dkt. # 26).) Plaintiffs serve as co-Trustees of the 20 iCap Trust (the “Trust”). (Compl. ¶¶ 15-16.) The Trust was created pursuant to the 21
1 Plaintiffs’ complaint refers to Columbia by its former name, “Umpqua Bank.” (See 22 generally Compl. (Dkt. # 1).) The court refers to Columbia by its current name in this order. 1 Chapter 11 liquidation plan and Trust Agreement of non-party iCap Enterprises, Inc.—a 2 collection of nearly 30 purported real estate investment businesses used to conduct the
3 fraud at issue in this action, collectively referenced herein as “iCap” or the “iCap 4 Entities.” (Id. ¶ 1 n.1 (listing the related enterprises).) The court has considered the 5 parties’ submissions, the relevant portions of the record, and the governing law. Being 6 fully advised,2 the court DENIES Columbia’s motion. 7 II. BACKGROUND3 8 Plaintiffs bring this action on behalf of investors who assigned their claims against
9 third parties to the Trust. (Id. at 1.) They allege that Columbia knowingly assisted iCap, 10 Chris Christensen, and Jim Christensen (together the “Christensens”) in the commission 11 of fraud and breaches of fiduciary duties. (Id. ¶ 9.) According to Plaintiffs, during a 12 10-year period beginning in 2013, the Christensens “stole or otherwise squandered 13 approximately $230 million obtained from over 1,800 investors in the United States and
14 abroad[.]” (Id. ¶ 8; see also id. ¶ 22.) Plaintiffs allege that the Christensens used the 15 investors’ funds to make payments to pre-existing iCap investors and that iCap provided 16 little or no return on these investments (the “iCap Ponzi Scheme”).4 (Id.) Plaintiffs 17
18 2 Columbia requests oral argument and Plaintiffs do not. (MTD at 1; Resp. at 1.) The court concludes that oral argument would not assist it in deciding the motion. (See Local Rules 19 W.D. Wash. LCR 7(b)(4). 3 The court accepts Plaintiffs’ allegations as true when evaluating Columbia’s motion to 20 dismiss. In re Tracht Gut, LLC, 836 F.3d 1146, 1150 (9th Cir. 2016) (citation omitted). 4 Plaintiffs define a Ponzi scheme as a fraudulent business operation whereby “the 21 fraudster lacks sufficient funds, i.e., actual revenues from investments, to meet its obligations to existing investors but is able to perpetuate operations by shuffling funds from new investors or 22 funds earmarked for other purposes to cover obligations to existing investors.” (Id. ¶ 133.) 1 further allege that the Christensens ran this fraudulent enterprise through iCap’s bank 2 accounts at Columbia. (Id. ¶ 7.) According to Plaintiffs, Columbia is liable for losses
3 proximately caused by the iCap Ponzi Scheme because that scheme could not have 4 existed without Columbia’s help. (Id.) 5 A. History of the iCap Entities 6 Chris Christensen founded iCap Enterprises, Inc. on August 9, 2007, and founded 7 its direct subsidiary iCap Equity, LLC, on August 15, 2011. (Id. ¶ 21.) He served as the 8 entities’ Chief Executive Officer, and his brother, Jim Christensen, served as the Chief
9 Operating Officer. (Id.) Between 2011 and 2023, the Christensens solicited private 10 investments in supposed real estate opportunities in the Pacific Northwest and 11 represented to investors that iCap was a real estate investment business. (Id. ¶ 22.) 12 iCap employed more than 35 people and had two business lines: the Portfolio 13 Business and the Vault Business. (Id. ¶¶ 22-23.) The Portfolio Business purportedly
14 focused on development of multifamily real estate projects, starting with undeveloped 15 land, building permits, or the improvement of existing structures. (Id. ¶ 23.) The 16 Christensens funded the Portfolio Business through private placements of debentures and 17 promissory notes which promised interest rates between 6% and 15%. (Id.) The Vault 18 Business focused on investing in “standalone real estate investments that had the
19 potential to be or already were cash flow positive.” (Id. ¶ 24.) The Christensens financed 20 the Vault Business’s operations through private placement notes and public demand 21 notes. (Id.) Plaintiffs allege that the two business lines provided little to no return on 22 investment and that the Christensens used both new investments and intercompany 1 transfers to pay pre-existing investors, thereby simulating a return. (Id. ¶ 25.) 2 Furthermore, Plaintiffs allege that the Christensens used the new investments and
3 intercompany transfers as a source of compensation and loans to Chris Christensen, 4 which were never repaid to the business. (Id.) 5 Plaintiffs allege that the Christensens, by virtue of their controlling positions and 6 representations to the iCap investors, owed the iCap investors fiduciary duties that 7 included, in part, “the duties of loyalty, care, integrity, candor, full disclosure, and to deal 8 honestly and in good faith.” (Id. ¶ 36.) Such fiduciary duties required the Christensens
9 to avoid self-dealing and conflicts of interest, and to provide truthful and timely 10 disclosures of the operation and performance of any investments. (Id. ¶ 37.) 11 B. The Alleged Ponzi Scheme 12 On September 28, 2023, the iCap Ponzi Scheme “collapsed” after the Christensens 13 resigned from their positions at iCap. (Id. ¶ 38.) Prior to that time, the Christensens used
14 investor funds to personally enrich themselves. (Id. ¶ 39.) Specifically, the Christensens 15 had promised iCap investors that they would receive steady returns in exchange for their 16 investments and that the promised returns would be paid from the yield generated by the 17 investments. (Id. ¶¶ 23, 40-41.) But this was not the case; rather, the Christensens paid 18 existing iCap investors using the contributions of new investors. (Id. ¶ 41.) To further
19 their fraudulent conduct, the Christensens made several false representations about the 20 state and performance of iCap investments. (See id. ¶ 42 (listing false statements 21 concerning the status of investments and associated returns).) 22 1 Plaintiffs also allege that the Christensens breached their fiduciary duties to iCap 2 investors by converting substantial funds in Columbia bank accounts for Chris
3 Christensen’s personal benefit. (Id. ¶ 100.) During a ten-year period beginning in 2013, 4 Chris Christensen transferred $30,469,282 from iCap accounts to his personal bank 5 accounts, accounts belonging to companies he owned or controlled, accounts used to fund 6 his personal lifestyle expenses, or to repay his personal debt obligations. (Id. ¶ 102; see 7 also id. ¶ 103 (listing the amount of funds converted each year between 2013 and 2023).) 8 The Christensens falsely documented these improper transfers of investors’ funds as
9 loans, reimbursements, or distributions. (Id. ¶ 105.) Plaintiffs allege that Chris 10 Christensen did not repay the purported loans and that none of the funds categorized as 11 reimbursements or distributions were actually for those purposes. (Id.) 12 C. Columbia’s Role in the Alleged Ponzi Scheme 13 iCap’s banking relationship with Columbia began in 2013 and continued for the
14 entirety of the Christensens’ operation of that business as a Ponzi scheme. (Id. ¶ 106.) 15 iCap was the most important client of Columbia’s Issaquah branch office and Columbia 16 employees described iCap as the branch’s “largest deposit customer[.]” (Id.) Svetla 17 Tzekov, Vice President and Branch Manager of the Issaquah branch office and later 18 Community Manager, served as the principal contact to the Christensens for Columbia
19 during the operation of the iCap Ponzi Scheme. (Id. ¶¶ 2, 107.) She serviced and 20 monitored all corporate and personal accounts for the Christensens and iCap. (Id. ¶ 107.) 21 Ms. Tzekov considered the relationship between Columbia and iCap to be strategically 22 important, calling it a “very profitable and big relationship” that, for nearly 10 years, 1 consistently paid Columbia a treasury management fee of $2,000 to $4,000 per month. 2 (Id. ¶ 108.) Columbia sought to retain iCap and the Christensens’ business, even offering
3 to reduce banking fees so as not to lose their business to a competing bank. (See id. 4 ¶¶ 111-115.) 5 Pursuant to the Bank Secrecy Act (“BSA”) and the governing Anti-Money 6 Laundering (“AML”) requirements, Columbia implemented internal controls designed to 7 detect if a banking customer was operating a Ponzi scheme, “including a customer 8 identification program; customer due diligence processes; account opening and
9 monitoring procedures; ongoing training for employees; and an automated account 10 monitoring system.” (Id. ¶ 120.) This compliance system flagged transactions or 11 abnormal patterns indicative of potentially illegal activity. (Id.) 12 Know Your Customer (“KYC”), one aspect of Columbia’s AML compliance 13 system, is a means of verifying a customer’s identity, assessing their risk profile, and
14 monitoring their transactions throughout the banking relationship. (Id. ¶ 121.) 15 Specifically, Columbia’s KYC process included several mandatory steps to assist it with 16 AML compliance, including due diligence to understand the nature of the customer’s 17 business; Enhanced Due Diligence (“EDD”) which included heightened scrutiny on 18 account activity for high-risk customers; and a mechanism to file suspicious activity
19 reports with relevant law enforcement authorities and detect and flag unusual patterns or 20 transactions. (Id. ¶ 122.) 21 Plaintiffs allege that Columbia knew iCap and Chris Christensen very well 22 because of Columbia’s KYC process and Ms. Tzekov’s efforts to develop a personal 1 relationship with Chris Christensen. (Id. ¶ 123.) Ms. Tzekov visited the iCap offices, 2 assisted the Christensens with their daily transactions and transfers, processed physical
3 cash on their behalf, and even sought personal employment with iCap. (Id.) 4 Notwithstanding Ms. Tzekov’s relationship with the Christensens, Columbia 5 determined through its KYC process that various iCap Entities were high-risk. (Id. 6 ¶ 124.) Between August 24, 2021, and November 21, 2023, Columbia conducted at least 7 17 EDD reviews and, each time, determined that iCap’s risk level was high. (Id.) Due to 8 the resulting high-risk classification, Columbia “perform[ed] heightened scrutiny of
9 iCap’s account activity[.]” (Id. ¶ 125.) 10 Plaintiffs further allege that Columbia gained extensive insight into the nature of 11 iCap, the identity of its clients, and fact that iCap’s fund accounts held investor deposits 12 through reviewing iCap’s organizational documents and financial statements as part of its 13 AML compliance activity. (Id. ¶¶ 126-127.) Columbia also learned about the nature of
14 iCap as a result of conducting due diligence into Chris Christensen when he applied for a 15 home loan or line of credit and as a result of the open-source research that Columbia ran 16 on various iCap Entities. (Id. ¶¶ 128-129.) According to Plaintiffs, it would have been 17 abundantly clear to Columbia that accounts at Columbia held iCap investors’ deposits 18 and that the investors “believed [that] they were investing in a legitimate real estate
19 business[.]” (Id. ¶ 130; see also id. ¶ 131 (alleging that Columbia’s internal email 20 communications confirm Columbia’s knowledge of the source of funds in the iCap 21 accounts).) 22 1 Plaintiffs further assert that Columbia had intimate knowledge of, (id. 2 ¶¶ 132-148), and provided substantial assistance to, (id. ¶¶ 149-170), the iCap Ponzi
3 Scheme. 4 1. Columbia’s Alleged Knowledge of the Ponzi Scheme 5 According to Plaintiffs, Columbia knew that iCap’s business model was not viable 6 based on the cash balance position in iCap’s accounts and the net losses of the iCap 7 enterprise. (Id. ¶ 136.) 8 a. The iCap Business Model Was Not Viable.
9 Plaintiffs first allege that iCap’s real estate investments did not generate sufficient 10 revenue to satisfy the monthly obligations owed to its investors and real estate lenders. 11 (Id. ¶ 135.) Accordingly, iCap’s bank accounts at Columbia were “frequently overdrawn 12 and/or carried negative balances.” (Id.) Columbia periodically contacted the 13 Christensens about the overdrawn accounts. (See, e.g., id. ¶ 136 (describing the date and
14 nature of these communications).) When this happened, iCap transferred funds from 15 various accounts—including those accounts that held investors’ money—to cover any 16 deficits, overdrafts, and obligations to existing investors. (Id.) Columbia also reviewed 17 the tax returns of the iCap Entities and saw that “they were taking huge losses.” (Id.) 18 Columbia also knew that most of the funds deposited by iCap into its Columbia accounts
19 came from iCap investors, intercompany transfers, and external lenders, “rather than 20 being generated through business operations.” (Id. ¶ 137.) In addition, Columbia had 21 “direct visibility” into iCap’s deposits; investors or other iCap Entities provided 95% of 22 the deposited funds. (Id.) 1 Similarly, contrary to iCap’s representations to investors, the Christensens did not 2 use the withdrawals from the iCap accounts to fund investments. (Id. ¶ 138.) Rather, the
3 Christensens used most withdrawals to pay returns to investors and complete 4 intercompany transfers. (Id.) Between October 2018 and July 2023, the Christensens 5 withdrew approximately $585 million from iCap accounts at Columbia. (Id.) 75% of 6 transactions during this period were related to returns to investors and intercompany 7 transfers. (Id.) Only 20% of transactions during this period were related to real estate 8 projects or to business operations. (Id.) Plaintiffs contend that this knowledge was
9 uniquely available to Columbia and thus Columbia knew that iCap Entities were not 10 operating their stated business and, instead, were operating the iCap Ponzi Scheme. (Id. 11 ¶ 139.) 12 b. iCap’s Banking Activities Were “Out of Pattern[.]” 13 Furthermore, Columbia determined after its own investigation that iCap’s banking
14 activities were “out of pattern for an investment firm.” (Id. ¶ 140.) Specifically, in 2020, 15 Columbia conducted a 90-day review of suspicious activity in iCap’s accounts. (Id. 16 ¶ 140.) In its investigations record for the period covering July 29, 2020, to December 17 11, 2020, Columbia noted that there was a $400,000 cash deposit during the review 18 period that matched an outgoing international wire to an individual investor for $100,000.
19 (Id.) Columbia determined that this movement of funds was suspicious, and “out of 20 pattern for an investment firm.” (Id. (emphasis omitted).) The Christensens could not 21 explain the source of the cash deposit. (Id.) Accordingly, Plaintiffs contend that 22 1 Columbia was aware of the iCap Ponzi Scheme based on its knowledge of these inflow 2 and outflow patterns. (Id.)
3 c. iCap’s Tax Losses Were Incompatible with Chris Christensen’s Withdrawals. 4 In 2019, Columbia rejected Chris Christensen’s application for a home equity line 5 of credit (“HELOC”). (Id. ¶¶ 141-142.) iCap had been reporting losses on its tax returns 6 that were incompatible with Chris Christensen’s receipt of funds from iCap. (Id. ¶ 141.) 7 Upon receipt of his application for a HELOC, a member of Columbia’s underwriting 8 group requested to review full 2018 tax returns for iCap’s business and a written 9 explanation from Chris Christensen on how iCap, which showed losses in the millions, 10 provided him a salary and guaranteed payment. (Id.) Columbia denied Chris 11 Christensen’s HELOC application as a result of its diligence into Chris Christensen’s 12 income and business operations. (Id. ¶ 142.) Despite these concerns, Columbia did not 13 shut down the iCap Ponzi Scheme. (Id.) 14 d. Columbia Knew iCap Shuffled and Commingled Investor Monies. 15 iCap routinely shuffled and commingled investor funds among its accounts at 16 Columbia. (Id. ¶ 143.) Plaintiffs allege that such activity is a classic sign of a Ponzi 17 scheme. (Id.) Columbia uniquely understood the structure of iCap’s various investment 18 funds, had visibility into the inflows and outflows of capital in the iCap accounts, and 19 purportedly knew there could be no valid business purpose for these movements of funds. 20 (Id. ¶ 145.) Between October 2018 and July 2023, 91% of deposits into one such fund, 21 called “Fund 1[,]” were “intercompany transfers, the majority of which were received 22 1 from iCap Equity, LLC.” (Id. ¶ 143.) During the same period, the Christensens used 2 91% of Fund 1’s withdrawals to pay iCap investors. (Id.) Thus, Plaintiffs assert that
3 Columbia had knowledge that “there was a commingling of funds such that the funds 4 were effectively pooled into one common fund.” (Id.; see also id. ¶ 144 (describing a 5 similar situation for “Fund 2”).) Furthermore, Columbia had knowledge of the transfers 6 through Ms. Tzekov’s management and oversight of iCap’s and the Christensens’ 7 accounts. (Id. ¶ 145.) For example, on April 5, 2022, Ms. Tzekov emailed iCap about a 8 $20,000 payment to an iCap investor that caused the account to be overdrawn. (Id.) In
9 response, an iCap team member emailed the Christensens (copying Ms. Tzekov) 10 requesting a transfer from “Fund 3” to Fund 2 to avoid overdrawing the account. (Id.) 11 e. Columbia Knew iCap Entities Transferred Investor Monies into Chris Christensen’s Personal Accounts. 12 Beginning in 2016, Columbia knew that the Christensens were transferring funds 13 into Chris Christensen’s personal account. (Id. ¶ 146.) Chris Christensen worked 14 directly with Ms. Tzekov to streamline the process of making the transfers. (Id.) 15 Specifically, in 2021, he informed her that he planned to make transfers from iCap 16 accounts to his personal accounts more often and requested a means of completing the 17 transfers more easily, such as a mechanism to do them online. (Id.) Furthermore, 18 Columbia knew that Chris Christensen used investor funds to purchase a vacation home. 19 (Id. ¶ 147.) Specifically, on January 27, 2016, he transferred $450,000 from an 20 investment fund to the entity that owned his vacation home and then wired almost 21 $470,000 to a title company for the purchase of the property, identifying the borrower as 22 1 the entity that owned the vacation home. (Id. ¶¶ 104, 147.) Even though it allegedly 2 knew that Chris Christensen had no legitimate business purpose for transfers of this
3 nature, Columbia intentionally enabled the transfers and did nothing to stop them. (Id. 4 ¶ 148.) 5 2. Columbia’s Alleged Assistance to the iCap Ponzi Scheme 6 Plaintiffs further allege that Columbia continued to provide substantial assistance 7 to the iCap Ponzi Scheme in several ways despite its knowledge of suspicious and illicit 8 activity. (Id. ¶ 149.)
9 a. Columbia Declined to End iCap’s Banking Services 10 According to Plaintiffs, Columbia wanted to continue generating lucrative banking 11 fees from iCap accounts and thus declined to discontinue its banking relationship with 12 iCap and the Christensens even after it learned of their fraud. (Id. ¶¶ 150, 152.) Notably, 13 other banks, which were far less familiar with iCap’s suspicious transactions and patterns,
14 declined to provide banking services for iCap. (Id. ¶ 151.) For example, Chase Bank 15 determined that it could not provide sufficient oversight to comply with relevant 16 regulatory requirements and declined to service iCap. (Id.) Because Columbia 17 prioritized retaining iCap and the Christensens as banking clients, iCap investors suffered 18 hundreds of millions of dollars in losses. (Id.)
19 b. Columbia Facilitated Fraudulent Money Transfers. 20 Next, Plaintiffs allege that Columbia routinely aided the Christensens with 21 completing fraudulent transfers in part to cover deficits when iCap had insufficient funds 22 in one of its various accounts. (Id. ¶ 153.) Ms. Tzekov sometimes contacted the 1 Christensens when an account was about to be overdrawn and suggested that they 2 transfer funds to cover the insufficiency. (Id. ¶¶ 154-55 (alleging two such examples of
3 this conduct that happened in 2022).) Columbia also aided the Christensens with 4 transferring iCap funds, including investor funds, to their personal accounts. (Id. ¶ 156; 5 see also id. ¶ 159 (alleging that on January 21, 2022, Columbia transferred $292,125 and 6 $99,000 to Chris Christensen’s personal accounts).) Ms. Tzekov explicitly affirmed that 7 Columbia would help Chris Christensen process transfers to his personal account if he 8 told her “when and how much.” (Id. ¶ 158.) Ms. Tzekov also offered to investigate ways
9 for Chris Christensen to complete the transfers unassisted. (Id.) 10 c. Columbia Did Not Further Investigate Red Flags. 11 During the banking relationship, Columbia undertook several investigations into 12 suspicious activities on the part of iCap and the Christensens, but “repeatedly failed to 13 escalate those concerns, both internally and externally.” (Id. ¶ 160.) Plaintiffs allege that
14 Columbia employees completed forms incorrectly to help iCap or Chris Christensen 15 evade scrutiny. (Id. ¶¶ 160, 167.) Although Columbia classified iCap as a high-risk 16 customer and completed at least 17 EDD reports on iCap transactions, Columbia did not 17 escalate any concerns to law enforcement or regulatory agencies. (Id. ¶¶ 161-62.) 18 Rather, after each report, Columbia decided only to monitor iCap and the Christensens
19 via the bank’s internal systems and concluded that there were no AML or BSA related 20 concerns. (Id. ¶ 162.) Specifically, Columbia’s EDD reports state that “the account 21 activity is in line with the customers normal banking history as a real estate investment 22 1 business[,]” even though Columbia knew that iCap’s activity was neither normal nor in 2 line with the business of a real estate investment firm. (Id.)
3 In the only detailed investigation it conducted, Columbia concluded in 2020 that 4 certain of iCap’s banking activities as “out of pattern for an investment firm.” (Id. 5 ¶ 163.) The 2020 investigation into suspicious transactions is presumably the only time 6 Columbia recommended filing a report with a regulatory agency. (Id.; see also id. 7 ¶¶ 164-65 (describing the applicable regulatory reporting scheme).) Ultimately, however, 8 Columbia did not report the suspicious activity that it detected in 2020. (Id. ¶ 166.)
9 Furthermore, Plaintiffs allege that Columbia “substantially assisted the 10 Christensens’ fraud, misuse, and misappropriation of [] funds throughout their banking 11 relationship” by accepting iCap investor deposits, permitting iCap’s commingled 12 accounts to remain open, and continuing to process thousands of transfers and 13 transactions, totaling tens of millions of funds, that moved investor funds between fund
14 accounts and Chris Christensen’s personal accounts. (Id. ¶ 168.) Columbia allegedly did 15 so to generate fees, charges, interest, and other forms of revenue at the expense of iCap 16 investors. (Id. ¶ 169.) 17 d. Columbia Knew of and Substantially Assisted the Christensens’ Breach of Fiduciary Duties. 18 Plaintiffs allege that Columbia knew through its due-diligence efforts that the 19 Christensens “solicited and accepted investments[] and that they owed [the iCap 20 investors] a fiduciary duty to act with the utmost good faith and in the best interest of 21 those [i]nvestors.” (Id. ¶ 171.) Plaintiffs also allege that Columbia knew that the 22 1 Christensens engaged in illicit transactions and otherwise acted to further the iCap Ponzi 2 Scheme. (Id. ¶ 172.) Nevertheless, rather than report iCap’s Ponzi Scheme to the proper
3 authorities, Columbia substantially assisted the Christensens with perpetrating the scheme 4 and breaching their fiduciary duties to the iCap investors. (Id.) 5 D. Procedural History 6 On September 26, 2025, Plaintiffs commenced this action, asserting claims for 7 (1) aiding and abetting fraud, and (2) aiding and abetting breach of fiduciary duty. (Id. 8 ¶¶ 173-187.) On December 30, 2025, Columbia moved to dismiss the complaint
9 asserting that: (1) Plaintiffs have not established standing to bring claims on behalf of all 10 iCap investors; (2) Plaintiffs fail to state a claim on behalf of unnamed iCap investors 11 who assigned their claims to the Trust; (3) Plaintiffs fail to state a claim for aiding and 12 abetting fraud; and (4) Plaintiffs fail to state a claim for aiding and abetting breach of 13 fiduciary duty. (See generally MTD.) The motion is now fully briefed and ripe for
14 decision. 15 III. ANALYSIS 16 The court considers each of Columbia’s requests for dismissal in turn. 17 A. Columbia’s Motion to Dismiss for Lack of Subject Matter Jurisdiction Under Rule 12(b)(1) is Denied. 18 Under Federal Rule of Civil Procedure 12(b)(1), a party may seek dismissal of an 19 action for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). The case or 20 controversy requirement under Article III of the U.S. Constitution “limits federal courts’ 21 subject matter jurisdiction by requiring, inter alia, that plaintiffs have standing and that 22 1 claims be ripe for adjudication.” Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 2 1115, 1121 (9th Cir. 2010) (internal quotation marks and citation omitted). “Standing
3 addresses whether the plaintiff is the proper party to bring the matter to the court for 4 adjudication.” Id. at 1122 (citation omitted). The Supreme Court has held that assignees 5 of a cause of action have standing to sue to redress assignors’ injuries and that historical 6 practice permits such representative suits. Sprint Commc’ns Co., L.P. v. APCC Servs., 7 Inc., 554 U.S. 269, 285-88 (2008) (“[W]ithin the past decade we have expressly held that 8 an assignee can sue based on his assignor’s injuries.”).
9 Columbia first attacks the complaint by asserting that Plaintiffs lack standing to 10 bring claims on behalf of those investors who have not assigned their claims to the Trust. 11 (MTD at 5-6. 5) Plaintiffs do not contest that they may not automatically sue on behalf of 12 non-assigning investors. (Resp. at 12 n.6.) Because the complaint “does not seek to 13 pursue claims or damages on behalf of [i]nvestors that have not assigned their claims to
14 the Trust[,]” the court denies Columbia’s motion to dismiss this action for lack of 15 standing. (Id.) 16 B. Columbia’s Motion to Dismiss for Failure to State a Claim is Denied. 17 Federal Rule of Civil Procedure 12(b)(6) provides for dismissal when a complaint 18 “fail[s] to state a claim upon which relief can be granted[.]” Fed. R. Civ. P. 12(b)(6); see
19 20 5 Columbia does not, however dispute that Plaintiffs have standing as assignees on behalf of iCap investors who previously assigned their claims to the Trust, either according to the 21 liquidation plan created by the Bankruptcy Court in October 2024 (the “Plan”) or subsequently through another means. (See MTD at 3; Reply at 3-4 (“Columbia takes no position about 22 whether investors may, in the future, assign any claims to the Trust[.]”) (emphasis in original).) 1 also Fed R. Civ. P. 8(a)(2) (requiring that the plaintiff provide “a short and plain 2 statement of the claim showing that the pleader is entitled to relief”). Under this
3 standard, the court construes the allegations in the complaint in the light most favorable 4 to the nonmoving party, Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 5 940, 946 (9th Cir. 2005), and asks whether the claim contains “sufficient factual matter, 6 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 7 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 8 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that
9 allows the court to draw the reasonable inference that the defendant is liable for the 10 misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “At the motion to dismiss 11 phase, the trial court must accept as true all facts alleged in the complaint and draw all 12 reasonable inferences in favor of the plaintiff.” In re Tracht Gut, 836 F.3d at 1150 13 (citation omitted).
14 Federal Rule of Civil Procedure 9(b) heightens the pleading requirements for all 15 claims that “sound in fraud” or are “grounded in fraud.” Kearns v. Ford Motor Co., 567 16 F.3d 1120, 1125 (9th Cir. 2009) (citation omitted); Fed. R. Civ. P. 9(b). To satisfy Rule 17 9(b), “allegations of fraud must be ‘specific enough to give defendants notice of the 18 particular misconduct which is alleged to constitute the fraud charged so that they can
19 defend against the charge and not just deny that they have done anything wrong.’” 20 Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (quoting Neubronner v. 21 Milken, 6 F.3d 666, 672 (9th Cir. 1993)). “Averments of fraud must be accompanied by 22 1 ‘the who, what, when, where, and how’ of the misconduct charged.” Vess v. Ciba–Geigy 2 Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citation omitted).
3 1. Plaintiffs need not identify in their complaint the iCap investors who assigned their claims to the Trust. 4 Columbia asserts that Plaintiffs inadequately pleaded their claims because the 5 complaint does not name the assigning investors and thus does not comport with Rule 6 9(b). (MTD at 6-7.) In response, Plaintiffs contend that this level of detail is not required 7 at the pleading stage; rather, they argue that “the identity of (and details related to) 8 assignors of Ponzi scheme damage claims are properly obtained through the discovery 9 process[.]” (Resp. at 13.) The court agrees with Plaintiffs. 10 Columbia relies on two district court cases to support its argument that Plaintiffs 11 must plead the details of each fraudulent transaction for each individual investor harmed 12 by a Ponzi scheme: In re TFT-LCD (Flat Panel) Antitrust Litig., No. C09-1115 SI, 2009 13 WL 4874872, at *4 (N.D. Cal. Oct. 6, 2009) (“TFT-LCD”) and Zazzali v. Eide Bailly 14 LLP, No. 1:12-CV-349-S-MJP, 2013 WL 6045978, at *35 (D. Idaho Nov. 14, 2013). 15 (MTD at 6-7; Resp. at 12-16.) The court, however, agrees with Plaintiffs that this case is 16 more similar to Miller v. Union Cent. Life Ins. Co., No. 2:14-cv-00575JNP-PMW, 2016 17 WL 2766636, at *2-4 (D. Utah May 12, 2016). (Resp.at 13.) In Miller, the trustee of a 18 trust sued on behalf of 430 individual victims of a Ponzi scheme who had assigned their 19 claims to the trust. Id. at *1. The district court denied the defendant’s motion to dismiss 20 for failure to identify the individual assignors, reasoning that “[t]he number of victims 21 would make it impractical . . . to set forth the names, times, and places” relevant to the 22 1 scheme, and that the complaint included sufficient information for the case to proceed 2 absent the identities of the assignors. Id. at *2 (emphasis omitted). The district court
3 further observed, however, that the plaintiffs would be required to identify the names of 4 the victims and the dates and places of the fraudulent transactions during discovery. Id. 5 Later, consistent with this ruling, the magistrate judge granted the defendant’s request for 6 discovery about the identity of the assignors and the basis of their claims. Id. 7 Here, as in Miller, Plaintiffs need not include the identity and other details about 8 the assignors in their complaint because: (1) the scheme is complex and spans a dozen
9 years, and the number of victims makes it impractical to set forth the details of each 10 instance of fraud in the complaint; and (2) Columbia can obtain that information through 11 the discovery process. The court determines that, even absent information about the 12 identities of the assigning investors, the complaint satisfies the heightened pleading 13 standard of Rule 9(b) because it states with particularity the “who, what, when, where,
14 and how” of the misconduct alleged. Vess, 317 F.3d at 1106. Specifically, the complaint 15 states that over the course of a 13-year banking relationship, Columbia knew of iCap and 16 the Christensens’ suspicious and illicit banking activity but failed to stop or further 17 investigate that activity. (See generally Compl.) Plaintiffs further allege that between 18 2013 and 2023, with Columbia’s assistance and knowledge, the Christensens “stole or
19 otherwise squandered approximately $230 million obtained from over 1,800 investors in 20 the United States and abroad” by inducing them to invest in a sham real estate business 21 that provided little or no return. (Compl. ¶ 8.) Plaintiffs represent that, as of the date 22 they filed their response, 959 former iCap investors asserting over $153 million in losses 1 have assigned their claims to the Trust. (Resp. at 1 n 2.) Accordingly, the court denies 2 Columbia’s motion to dismiss for failure to identify the assignors in the complaint.
3 2. Plaintiffs state a claim for aiding and abetting fraud. 4 Columbia next asserts that the court must dismiss Plaintiffs’ claim for aiding and 5 abetting fraud because Plaintiffs have not adequately alleged iCap’s primary liability for 6 fraud, Columbia’s actual knowledge of the iCap Ponzi Scheme, or Columbia’s substantial 7 assistance to the scheme. (MTD at 7-17.) In response, Plaintiffs clarify that they are 8 pursuing a claim of aiding and abetting liability under the second prong of Restatement
9 (Second) of Torts § 876—that is, they allege that Columbia knew of the Christensens’ 10 tortious conduct and substantially assisted or encouraged their fraud. (Resp. at 24-25.) 11 Washington courts use a test articulated in the Restatement (Second) of Torts to 12 determine whether a plaintiff has stated a claim against a particular defendant for aiding 13 and abetting a second defendant who engaged in tortious conduct:
14 For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he 15 (a) does a tortious act in concert with another or pursuant to a common design with him; or 16 (b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct 17 himself; or (c) gives substantial assistance to the other in accomplishing a 18 tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person. 19 Restatement (Second) of Torts § 876 (1979) (cited with approval in Martin v. Abbott 20 Lab’ys, 689 P.2d 368, 378 (Wash. 1984)). Thus, “to plead a claim for aiding and 21 abetting[,] a plaintiff must allege (i) the existence of a violation by the primary 22 1 wrongdoer; (ii) knowledge of this violation by the aider and abettor; and (iii) that the 2 aider and abettor substantially assisted in the primary wrong.” In re Consol. Meridian
3 Funds, 485 B.R. 604, 615-16 (Bankr. W.D. Wash. 2013) (interpreting Washington law). 4 Furthermore, Plaintiffs must plead fraud with sufficient particularity to satisfy the 5 requirements of Rule 9(b). Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007). 6 a. Existence of a violation by the primary wrongdoer 7 Aiding and abetting liability depends on the establishment of primary liability 8 against another party for the primary tort. Restatement (Second) of Torts § 876 (1979);
9 see also Brashkis v. Hyperion Cap. Grp., LLC, No. C11-05635RBL, 2011 WL 6130787, 10 at *3 (W.D. Wash. Dec. 8, 2011) (“The aiding and abetting claim cannot proceed when 11 the fraud claim does not.”). To state a claim for common-law fraud in Washington, a 12 plaintiff must allege “(1) representation of an existing fact; (2) materiality; (3) falsity; 13 (4) the speaker’s knowledge of its falsity; (5) intent of the speaker that it should be acted
14 upon by the plaintiff; (6) plaintiff’s ignorance of its falsity; (7) plaintiff’s reliance on the 15 truth of the representation; (8) plaintiff’s right to rely upon it; and (9) damages suffered 16 by the plaintiff.” Adams v. King Cnty., 192 P.3d 891, 902 (Wash. 2008) (citation 17 omitted). The parties agree that a Ponzi scheme is a form of fraud. (MTD at 8; Resp. at 18 17.)
19 Columbia avers that Plaintiffs’ claim fails because they have not sufficiently 20 alleged that iCap is a Ponzi scheme. (MTD at 9-10.) The Ninth Circuit defines a Ponzi 21 scheme as 22 1 an arrangement whereby an enterprise makes payments to investors from the proceeds of a later investment rather than from profits of the underlying 2 business venture, as the investors expected. The fraud consists of transferring proceeds received from the new investors to previous investors, 3 thereby giving other investors the impression that a legitimate profit making [sic] business opportunity exists, where in fact no such opportunity exists. 4 In re Agric. Rsch. & Tech. Grp., Inc., 916 F.2d 528, 531 (9th Cir. 1990) (citation 5 omitted). 6 Specifically, Columbia asserts that iCap did not make “misrepresentations to 7 investors that the business venture was profitable (when it was not) and [] use[] new 8 investor money to portray the business as profitable.” (MTD at 9 (emphasis in original).) 9 Contrary to Columbia’s assertion, however, Plaintiffs have pleaded facts sufficient to 10 show the existence of the iCap Ponzi Scheme consistent with the Ninth Circuit’s 11 definition. Plaintiffs allege that prior to the current proceedings “the Bankruptcy Court 12 found that the iCap Entities operated as a Ponzi scheme beginning no later than October 13 2018 through July 2023[.]” (Compl. ¶¶ 97-98.) Specifically, the Bankruptcy Court 14 found that 15 a. [the Christensens] operated the iCap enterprise as a Ponzi scheme raising 16 approximately $230 million from over 1,800 investors in the United States and abroad; 17 b. the Ponzi scheme involved the use of funds provided by new investors to the iCap enterprise to make payments to already-existing investors and 18 other creditors; and c. the iCap enterprise did not operate as a legitimate profit-making business. 19 (Id. ¶ 99; see also Confirmation Order.) On this basis, the court concludes that Plaintiffs 20 have plausibly alleged that iCap engaged in the primary tort of fraud. 21 22 1 b. Columbia’s knowledge of the violation 2 Columbia next argues that Plaintiffs’ claims fail because they do not sufficiently
3 allege that Columbia had actual knowledge of any alleged Ponzi scheme. (MTD at 10.) 4 In response, Plaintiffs make three arguments concerning the elements of actual 5 knowledge: (1) that actual knowledge can be generally averred under FRCP 9(b); (2) that 6 actual knowledge may be inferred and proven by circumstantial evidence; and (3) that the 7 actual knowledge requirement may be satisfied by showing Columbia’s “conscious 8 avoidance” because Columbia “suspected a fact and realized its probability, but refrained
9 from confirming later in order to be able to deny knowledge.” (Resp. at 21 (citing In re 10 Mastro, No. C9-16841MLB, 2017 WL 2889659, at *16 (Bankr. W.D. Wash. July 6, 11 2017).) 12 This court agrees, in pertinent part, that actual knowledge may be averred 13 generally under Rule 9(b); pleading actual knowledge, however, is still subject to the
14 requirement that a plaintiff must state “factual content that allows the court to draw the 15 reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 16 U.S. at 662; see also Fed. R. Civ. P. 9(b) (“[K]nowledge . . . may be alleged generally.”). 17 Moreover, the plaintiff must allege that the defendant had actual knowledge of the 18 primary violation. See Neilson v. Union Bank of California, N.A., 290 F. Supp. 2d 1101,
19 1119 (C.D. Cal. 2003). Although actual knowledge may be inferred and proven by 20 circumstantial evidence, allegations of the same must still satisfy the pleading 21 requirements set forth in Twombly and Iqbal. Sloan v. Thompson, 115 P.3d 1009, 1014 22 (Wash. 2005). 1 Here, the court concludes that Plaintiffs have alleged facts generally averring that 2 Columbia had actual knowledge of the Christensens’ and iCap’s fraud. These facts
3 include the results of Columbia’s KYC and customer monitoring programs (Compl. 4 ¶¶ 106-131); Columbia’s determination that iCap was high risk and its decision to 5 conduct at least 17 EDD reviews during the banking relationship (id. ¶¶ 124-25); 6 Columbia’s review of iCap’s organizational documents, financial statements, and tax 7 records, which outlined the nature of iCap’s business and showed that the iCap bank 8 accounts held investors’ monies which the Christensens used for real estate investments
9 (id. ¶¶ 126-131); and Columbia’s knowledge that iCap shuffled and commingled investor 10 monies and transferred investor monies to Chris Christensen’s personal accounts (id. 11 ¶¶ 143-45). On these bases, the court concludes that Plaintiffs have plausibly alleged that 12 Columbia had actual knowledge of the iCap Ponzi Scheme. 13 c. Columbia’s assistance in the primary wrong
14 Finally, Columbia asserts that Plaintiffs inadequately pleaded that Columbia 15 substantially assisted with the underlying fraud because their allegations either fall short 16 of Rule 9(b)’s requirement for particularity or describe routine banking transactions. 17 (MTD at 15-17.) Again, the court disagrees. 18 Restatement (Second) of Torts § 876, which the Washington Supreme Court
19 adopted in Martin, requires a showing that a defendant acted jointly with a tortfeasor to 20 produce the harm. Martin, 689 P.2d at 378. Although no published Washington decision 21 defines “substantial assistance” by a bank in the context of a Ponzi scheme, Washington 22 courts have clarified that assistance necessary to establish aiding and abetting liability 1 must be more than the “expression of an opinion” on which the tortfeasor may have 2 relied, Cain v. Dougherty, 341 P.2d 879, 882 (Wash. 1959), and that under certain
3 circumstances those entities providing professional services, such as law firms, may be 4 liable for aiding and abetting fraud, Aggen v. Graham & Dunn, P.C., No. 122250588, 5 2014 WL 5477920, at *9 (Wash. Super. July 03, 2014). Relatedly, courts in this District 6 presented with this question have held that: 7 [a] bank that performs routine banking transactions for a customer can be held liable for aiding and abetting that customer to commit a tort, if the bank 8 knew that the routine transactions were part of a scheme to injure a third party[.] 9 Villalobos v. Deutsche Bank Nat’l Tr. Co., No. C09-1450JCC, 2011 WL 13232599, at *4 10 (W.D. Wash. May 3, 2011) (citing In re First All. Mortg. Co., 471 F.3d 977, 995 (9th Cir. 11 2006) (“[The] ordinary business transactions a bank performs for a customer can satisfy 12 the substantial assistance element of an aiding and abetting claim if the bank actually 13 knew those transactions were assisting the customer in committing a specific tort.”). 14 Viewing the complaint in a light most favorable to Plaintiffs, the court concludes 15 that Plaintiffs sufficiently allege that Columbia substantially assisted with the underlying 16 fraud. As discussed above, Plaintiffs plausibly allege Columbia’s actual knowledge of 17 the iCap Ponzi Scheme. (See supra at 7.) Plaintiffs further allege that Columbia 18 substantially assisted in that scheme by facilitating fraudulent money transfers; failing to 19 investigate banking activity that it deemed risky and suspicious; and failing to terminate 20 banking services to iCap. (See Resp. at 9, 24.) The court further determines that these 21 allegations satisfy Rule 9(b). The complaint sets forth the nature of and dates of 22 1 operation of the iCap Ponzi Scheme and describes: (1) Columbia’s assistance with 2 fraudulent money transfers that led, in part, to Columbia’s determination that iCap’s
3 banking activities were “out of pattern for an investment firm[;]” (2) the diversion of 4 iCap funds to the Christensens for personal use; and (3) 17 investigations by Columbia 5 into iCap’s suspicious banking activity that ultimately did not result in termination of the 6 banking relationship. (See Compl. ¶¶ 97-99, 150-70; see also Confirmation Order.) On 7 this basis, the court concludes that Plaintiffs have sufficiently alleged that Columbia 8 substantially assisted the iCap Ponzi Scheme. As a result, the court concludes that
9 Plaintiffs state a claim for aiding and abetting fraud and denies Columbia’s motion to 10 dismiss this claim. 11 3. Plaintiffs state a claim for aiding and abetting breach of fiduciary duty. 12 Finally, the court also concludes that Plaintiffs state a claim for aiding and abetting 13 the Christensens’ breach of fiduciary duty. To state a claim for breach of fiduciary duty,
14 a plaintiff must allege: (1) the existence of a duty owed; (2) a breach of that duty; 15 (3) resulting injury; and (4) that the claimed breach proximately caused the injury. Micro 16 Enhancement Int’l, Inc. v. Coopers & Lybrand, LLP, 40 P.3d 1206, 1217-18 (Wash. 17 2002). 18 The parties do not dispute that the Christensens breached their fiduciary duties to
19 the iCap investors. (See generally MTD; Resp.; see also Compl. ¶¶ 126-27, 130-31, 171, 20 180-81.) Rather, Columbia contends that Plaintiffs have inadequately pleaded that it had 21 knowledge of any fiduciary duty or provided substantial assistance to the Christensens’ 22 violation. (MTD at 20-22.) 1 a. Columbia’s knowledge of the violation 2 Columbia first asserts that Plaintiffs fail to state a claim for aiding and abetting
3 breach of fiduciary duty because they insufficiently allege that Columbia knew of a direct 4 relationship between the Christensens and the investors or of any fiduciary duty. (Id. at 5 20.) As discussed earlier, however, Plaintiffs have plausibly alleged that, Columbia had 6 knowledge of the nature of the Christensens’ business, source of the deposited funds, and 7 fiduciary duties as a result of its KYC process, EDD reviews, and review of iCap 8 documents. (See supra at 7; see also Compl. ¶¶ 116-122 (KYC monitoring); ¶¶ 124-25
9 (EDD reviews); ¶¶ 126-31 (review of iCap documents and fiduciary duties to investors).) 10 Thus, the court concludes that Plaintiffs have sufficiently alleged Columbia knew of the 11 Christensens’ fiduciary duties and breaches thereof. 12 b. Columbia’s assistance in the primary wrong 13 The court similarly concludes that Plaintiffs have sufficiently alleged that
14 Columbia substantially assisted the Christensens’ breach of fiduciary duties. The parties’ 15 arguments regarding substantial assistance to the Christensens’ breach of fiduciary duty 16 are nearly identical to the arguments they made with respect to aiding and abetting fraud. 17 (MTD at 21-22; Resp. at 24-25.) Columbia’s banking services amount to substantial 18 assistance because Columbia allegedly processed several fraudulent money transfers,
19 permitted the diversion of iCap’s funds to the Christensens for personal use, and 20 maintained the banking relationship despite conducting 17 investigations into suspicious 21 banking activity. (Compl. ¶¶ 150-170.) The court concludes that Plaintiffs have 22 sufficiently alleged that Columbia substantially assisted the Christensens’ breach of 1 fiduciary duty. Because Plaintiffs state a claim for aiding and abetting breach of 2 fiduciary duty, the court denies Columbia’s motion to dismiss this claim.
3 IV. CONCLUSION 4 For the foregoing reasons, the court DENIES Columbia’s motion to dismiss (Dkt. 5 # 23). 6 Dated this 9th day of June, 2026. A 7 JAMES L. ROBART 8 United States District Judge 9 10 11 12 13 14 15 16 17 18
19 20 21 22