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BofI Securities Class Action Alleges Money Laundering


BofI, “Bank of Internet,” is the holding company for BofI Federal Bank, a provider of consumer and business banking products through the Internet in the United States.  BofI Federal Bank’s deposits products include consumer and business checking, demand, savings, and time deposit accounts.  BofI Federal Bank’s most significant business is making mortgages to high-net-worth individuals for the purchase of expensive properties through BofI Federal Bank’s Bank of Internet USA brand.

Who Is Affected?

This class action is brought on behalf of a class consisting of all persons and entities, whopurchased BofI securities between September 4, 2013 and October 13, 2015, inclusive, seeking to recover damages and pursue remedies under the Securities Exchange Act of 1934.  BofI was incorporated in Delaware in 1999 and is headquartered in San Diego, California.  Its shares trade on NASDAQ under the ticker symbol “BOFI.” 

Procedural History

This class action was filed on October 15, 2015 and is captioned Steven Golden, et al. v. BofI Holdings, Inc., et al.  It was filed in the California Southern District Court and its civil docket number is 3:15-cv-02324-GPC-KSC.  The class period runs from September 4, 2013 through October 13, 2015, inclusive.

The class period began on September 4, 2013, when BofI filed its 10-K annual report with the Securities and Exchange Commission announcing BofI’s year-end results and certifying to its compliance with U.S Anti-Money Laundering and Customer Identification regulations of the Patriot Act.  For the next two years, until August 2015, BofI has confirmed and subscribed to these statements on many occasions in quarterly and annual reports and releases. 

On August 22, 2015, The New York Times published an article regarding BofI’s suspicious lending practices to people who were later found to have run afoul of the law, and also large mortgages to wealthy foreigners without prior controls to ensure compliance with federal anti-money laundering regulations. 

On October 13, 2015, The New York Times reported that Matt Erhart, a former internal auditor at Bank of Internet, had filed a lawsuit against BofI for violating federal laws designed to protect whistle-blowers and among other things revealing that:

  1. BofI’s borrowers included foreign nationals who should have been off-limits under federal anti-money-laundering laws;
  2. As many as 200 client accounts lacked tax identification numbers, contrary to BofI’s representations to the Office of the Comptroller of the Currency, its primary regulator;
  3. BofI failed to provide full and timely information to regulators; and
  4. Mr. Erhart was fired as a result of having revealed wrongdoing at BofI to management and federal regulators.

On this news, BofI’s shares fell 30.2% on October 14, 2015.

Current Case Status: 

This case is in the notice period.  When a shareholder brings suit under certain federal securities laws, generally that shareholder must give notice via a press release.  This notice starts a sixty-day period of time when any shareholder can investigate the underlying claims of the lawsuit and then elect to bring suit as well.  At the end of this sixty-day period, the court appoints one shareholder (or a group of shareholders) to prosecute the securities litigation.  We will review the docket again in December and update this page as warranted.

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