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Wednesday, Jul 17, 2024
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Bank of the Internet Stock Takes Another Hit

Bank of the Internet sought to reassure investors Monday after its share price fell more than 10 percent in the past week amid renewed coverage of a shareholder class action alleging the bank manipulated its financial records.

The class action claims BofI engaged in riskier practices than it disclosed to shareholders and that prices tumbled in October when a former auditor went public with a whistleblower lawsuit. The shareholder class action resurfaced last week when the suit was amended to include the Houston Municipal Employees Pension System as lead plaintiff.

BofI share prices fell 25 percent over two days last week, from $23 to $17, and now stand at about $19, a 12 percent drop since last Monday.

BofI’s statement Monday said the amended suit, which included additional info from unnamed former employees, was nothing more than “unsubstantiated stories.” It also reiterated its claim from October that the underlying allegations were part of a coordinated effort from short sellers to tank the bank’s stock price, claiming they were behind negative blog posts.

“The company continues to be the target of anonymous short-seller hit pieces designed to manipulate the market in a veiled effort to benefit themselves at the expense of BofI’s shareholders,” BofI said. “These anonymous pieces are based on speculation, innuendo and outright misrepresentations.”

Former auditor Charles Matthew Erhart filed his own suit in October, claiming the bank fired him after he shared concerns about possible regulatory violations with federal officials. According to Erhart, the bank didn’t properly vet some clients, making loans to foreign nationals that may have violated anti-money laundering rules. He further claimed BofI tried to remove references to potential violations from internal audits.

BofI has countered that Erhart was a disgruntled and sub-par employee and that regulators haven’t taken any action in response to his claims.

“The absence of public enforcement actions highlight how disconnected these allegations are from the reality of BofI’s highly compliant and top-performing business,” the bank said.

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