Claims of Insider Trading and Fraud
A Bank of Internet shareholder has sued the bank’s parent company in California federal court, alleging that the bank’s directors made millions of dollars from insider trading and artificially inflated the company’s stock price, in violation of federal banking regulations.
The lawsuit claims that 12 directors of the San Diego-based bank participated in and covered up violations of banking and securities laws and secrecy laws and also fired an internal auditor for reporting the violations to federal regulators.
According to the complaint, the scheme was intended to make the company appear more profitable and attractive to investors, while the directors sold millions of dollars’ worth of shares at artificially inflated prices based on inside material information.
In February, Bank of Internet’s internal auditor Matt Erhart notified the SEC that the company allegedly lied in response to an SEC subpoena and hid information about suspicious loans. The bank’s internal practices also were questioned, including making loans to foreign nationals and keeping hundreds of deposit accounts without tax identification numbers. Erhart was fired last June and has filed suit against his former employers.
Other counts in the complaint against the bank’s directors allege that they breached their fiduciary duties to stockholders, abused internal controls, committed gross mismanagement, and unjust enrichment.
The Bank of Internet and several of its executives are defendants in a separate action brought by investors in California federal court.
Call a Los Angeles Shareholder Fraud Attorney Today
If you are a shareholder or investor with Bank of Internet, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles shareholder fraud attorney today for a consultation.