Port Angeles-based First Fed Bank faces a $106 million lawsuit filed on June 10 in King County Superior Court, the suit alleging the bank was complicit in a borrower’s water vending machine Ponzi scheme.

The bank disclosed the suit in a Form 8-K filed with the Securities and Exchange Commission (SEC) on Friday, June 13, 2025.

A trial is tentatively set for June 2026.

The bank has a branch in Port Townsend and in other towns across northwestern Washington including Forks, Sequim, Silverdale, Bainbridge Island, Bellingham, Ferndale, Edmonds and Seattle.

Former First Federal CEO Matthew Deines denied the allegations in a prepared statement soon after the filing.

“We are a 102-year-old community bank,” Deines said. “This is a Wall Street firm trying to recoup funds. We were a victim like many others.”

Deines resigned from his post on July 16. Chief Banking Officer Christopher Neros resigned July 2. 

According to the SEC filing, a hedge fund known as 352 Capital filed a complaint against First Fed Bank, a subsidiary of First Northwest Bancorp in King County Superior Court on June 10. The complaint arose from 352 Capital’s alleged investment in Water Station Management LLC bonds. 

In the lawsuit, 352 Capital accused First Fed Bank of knowingly facilitating the alleged Ponzi scheme to protect its own exposure to Water Station Management, a company that claimed to operate thousands of vending machines but allegedly fabricated key data.

The complaint alleges that Water Station Management and certain affiliated individuals and entities misappropriated over $100 million by using the proceeds of the bond offering to repay earlier investors and creditors, including First Fed Bank, rather than for the disclosed purpose of expanding Water Station Management’s business. 

The complaint asserts claims against the bank for aiding and abetting the alleged fraud, conspiracy to commit fraud, unjust enrichment, and constructive trust, and seeks a variety of relief, including nearly $107 million in compensatory damages plus interest, unspecified punitive damages, and attorneys fees and costs. 

“The company and the Bank strongly dispute the allegations contained in the complaint, and intend to vigorously defend against the claims,”according to the bank’s SEC filing.

The suit alleges that First Fed diverted funds from Water Station’s accounts to pay itself back on loans made to Wear’s businesses. The suit also alleges First Fed issued loans to Water Station investors, many backed by the U.S. Small Business Administration, without proper underwriting. Allegations also include that the bank invested in the water machines and knew that many of them did not exist and intentionally blocked franchisees from discovering the fraud. 

The Washington State Department of Financial Institutions (DFI) filed a Statement of Charges against the Everett-based Water Station Management and its founder Ryan Wear, affiliated entities, and several of its salespersons for multiple violations of the Securities Act between 2016 and 2022.

The DFI statement alleges that Water Station and its representatives offered and sold water vending machines that were serviced and managed by the company for a fee. Nationwide, at least 171 investors spent more than $129 million on this investment. At least 10 Washington residents invested approximately $11.2 million.

The DFI alleges that to help sell its investment, Water Station misled its investors. It funneled at least 70 individuals toward small business loans while neglecting to inform them that using these loans to purchase Water Station investments would violate federal guidelines. 

Additionally, DFI investigators assert that Water Station also executed a more egregious scheme to defraud investors by misleading them about the number and location of the water vending machines. They allege that the company sold investors thousands of machines that either did not exist or did not exist in the places the company represented them to be. 

Specifically, the lawsuit alleges that of the nearly 15,000 machines investors purchased only about 6,000 existed, according to the statement of charges. More than half the machines that did exist were in a warehouse, not earning revenue. 

“Washington’s securities laws exist to protect investors,” wrote William Beatty, of the DFI Division of Securities. “Taking action against entities that make unlawful offerings and those that mislead investors is an important part of DFI’s mission of investor protection.”

Water Station raised hundreds of millions of dollars from investors and banks before ultimately being forced into involuntary bankruptcy proceedings late last year.

The Statement of Charges announced DFI’s intent to order Water Station and its founder, Ryan Wear, to cease and desist from violations of the Securities Act, to pay a fine, and to pay costs related to the investigation. The action puts several Water Station salespersons on notice that DFI intends to order them to do the same. 

According to DFI, the state agency is the first state regulator to take public action against Water Station for violating state securities laws.

The plaintiff is demanding at least $106,925,000 in compensatory damages.

In August 2025, federal authorities criminally charged Water

Station Managment operator, Wear, in connection with the Ponzi 

scheme.

“Wear’s alleged scheme spanned more than seven years and ensnared hundreds of investors, including veterans who were solicited with higher guaranteed returns and exclusive financing options,” said Corey Schuster, chief of the U.S. Securities and Exchange Commission Division of Enforcement’s Asset Management Unit. 

On Friday, Sept. 12, First Northwest Bancorp and its subsidiary First Fed (Nasdaq: FNWB) annouced that Curt Queyrouze had been named chief executive officer and president, effective. Sept. 17. Queyrouze was most recently president of the holding company for Coastal Community Bank in Everett.