BofI Holding faces securities class action suit


The holding company that controls the online financial institution BofI Federal Bank has been hit with a securities class action lawsuit alleging unlawful conduct and materially false or misleading statements that were likely to result in greater regulatory scrutiny. To learn more about this case, visit Battea’s BofI case summary.

BofI – short for Bank of Internet – and certain of its executives face the class action suit after allegations of potential money laundering came to light in late March. That, in turn, led to more oversight from federal regulators, and made all public statements put out by the company and the executives allegedly false or misleading at all times.

The suit was filed in the U.S. District Court for the Southern District of California, and has a class period from April 28, 2016 to March 30, 2017.

An online financial institution faces a securities class action suit related to potential money laundering.An online financial institution faces a securities class action suit related to potential money laundering.

Looking at the allegations
Specifically, the incident that set off this class action suit was the publication of a report in the New York Post, which said the U.S. Department of Justice and U.S. Office of the Comptroller of the Currency were probing BofI and its Chief Executive Officer, Gregory Garrabrants, for possible connection to money laundering. While neither has been charged with an actual crime at this point, the company’s accounting and money-laundering controls have been brought up in civil lawsuits in the past.

For its part, the company told the newspaper in a written statement, “Due to false allegations made in short seller hit pieces and pending litigation, agencies routinely ask questions to assure themselves that such allegations are without basis. However, there are no material investigations that would require public disclosure and BofI remains in good regulatory standing.”

Neither the DOJ nor OCC would comment on the allegations.

In a further, separate statement, BofI called the allegations “meritless,” and noted that they had been around for some time with no legal action apparently forthcoming. Furthermore, when initial allegations were made in one of the civil suits two years ago, the bank said, it hired an outside law firm to conduct an investigation into the allegations, and that audit produced no additional evidence of wrongdoing. It added that like all other financial institutions, it is examined by federal regulators on a regular basis to ensure all necessary procedures are being followed.

The impact on stock prices
At the start of the class period in late April 2016, shares of BofI were trading at $20.31 apiece, and that number is significantly higher today. The stock price began rising in earnest in November and December of last year, but reached a recent peak on March 1, 2017, when it climbed to $32.11 per share.

But upon publication of the Post’s report, that price took a significant hit, falling from $27.58 on March 30 to $24.12 by April 10. Since then, it has recovered some of its value, and now trades at $24.70 per share.

For more information on this case or other class action litigations, please contact Kevin Doyle, Senior Vice President, at 203-987-4949 or