The Federal Reserve issued a coercive measure against Lynnwood, Washington-based UniBank this week, amid allegations that the bank was involved in a Ponzi scheme.

UniBank and its parent company, U&I Financial Corp., have entered into an agreement with the central bank and the Washington State Department of Financial Institutions to make changes aimed at strengthening the management and operation of the bank due to this which the Fed characterized as deficiencies in managing consumer non-compliance risks.

The state banking supervisor, working with the Federal Reserve Bank of San Francisco, conducted two bank examinations and reported on February 12 and July 18 that they had identified unspecified deficiencies within the bank. A Fed study, released June 4, found deficiencies in the bank’s consumer compliance risk management program.

The reviews follow allegations of a Ponzi scheme against UniBank. A modified lawsuit filed in Snohomish County Superior Court added more than 100 plaintiffs and claimed that UniBank and First Fed Bank were involved in facilitating more than 90 loans to invest in WaterStation technology.

The lawsuit claimed that WST founder Ryan Wear exploited the small business loan system and sold investments in water bottle filling station machines that WST claimed would be installed and maintained in stores and other retail outlets for a portion of the profits once the investment is made. do. Investors claim they were told they would receive a share of the profits. The lawsuit claimed it was a Ponzi scheme because the new investors’ money was allegedly used to pay returns to previous investors.

Last June, the victims of a alleged Ponzi scheme sued UniBank in federal court for losses incurred through loans the bank offered to finance their investments in an oil and gas technology company, Clean Energy Technology Association, Inc.

CETA claimed to invent and hold a patent for technology that would build carbon capture and utilization units that could be installed on oil and natural gas wells and pipelines to extract carbon dioxide from the gas. The CCUs did not perform and generate the expected profits, and the company used the money to repay previous investors.

The judge, however, said the plaintiffs had not convincingly demonstrated how UniBank would have benefited from its employees’ allegations. Violations of the Racketeer Influenced and Corrupt Organizations Act. UniBank’s participation in any fraudulent scheme with CETA would expose the bank to substantial financial risk, the judge noted.

“Plaintiffs fail to plausibly allege a benefit. Accordingly, UniBank and U&I cannot be held vicariously liable for the conduct of their employees, and plaintiffs fail to assert a RICO claim,” the judge said.

Leadership changes began at UniBank in February when Stephanie Yoon, then executive vice president and chief risk officer, stepped in as interim CEO. In July, the bank The board confirmed Yoon as permanent CEO. The bank made three key appointments alongside Yoon: Ken Johnson and Scott Strand joined as new directors and promoted current director Ellis Chang to board chairman.

In September, UniBank made two additional appointments to its management team, with Robert Disotell as executive vice president and chief credit officer and JJ Kim as executive vice president and chief banking officer.

As a result of the Fed’s enforcement actions, UniBank agreed to take steps to fully utilize U&I’s financial and management resources and submit a written plan to the supervisors, detailing plans to strengthen oversight by the Board of Directors. The administration of the management and operations of the bank, including loan administration and credit risk management. , capital, profits, loan rating and review, and consumer compliance risk management.

UniBank must submit a written program on its loan portfolio rating detailing the standards and criteria for evaluating the credit quality of loans, including indicating the factors used to assign appropriate risk ratings to loans and the procedures for reassessing loan rating in case there are significant changes in the borrower’s performance or in the value of the collateral.