Latest News on BofI Money Laundering Case

In March 2017, the Department of Justice (DOJ) began investigating the Bank of the Internet (BofI) for possible money laundering violations.  However, the company provided a written statement claiming that the company is in good regulatory standing and does not need to report on material investigations.  By the end of March, the BofI’s stock decreased by 5.26% even though BofI had conducted an internal investigation with a major law firm that suggested that the DOJ’s allegations were false and the bank did not participate in a money laundering scheme.

Later in October 2017, it was reported that BofI was under investigation by the Security Exchange Commission (SEC) for 16 months, however, the investigation actually ended several months sooner without the SEC taking any further action or making any allegations against BofI.  After this information was released, despite the SEC having not found any evidence of wrongdoing, BofI’s stock decreased another 4.57%.

In the case Mandalevey v. BofI Holding, Inc., the plaintiffs delivered a statement by a “confidential witness” that the officials of the company had no knowledge of the investigation.  The Court agreed with the plaintiff’s claim and said the statements made in March must have been falsified.

Under the Securities Exchange Act, the plaintiffs were required to plead “loss causation” meaning that the defendant’s fraud led to the decrease in stock for BofI.  This case provides a new defense for a company facing a securities class action case by perpetuating the idea that information that is publicly available via a Freedom of Information Act (FOIA) request is not actionable and cannot be used against a company.


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