Shares in Banc of California Inc (NYSE:BANC), the fast-growing, high-profile listed US bank, plunged 29.05% to close Tuesday at $11.26 after it was hit by allegations of having links with an imprisoned conman.
A total of 26.51 million shares of the bank were traded Tuesday, compared to its usual average volume of just 636.41 K shares.
The bank was in the limelight recently for agreeing to pay $100 million for naming rights to a Los Angeles soccer stadium. That August event, and subsequently the September resignation by Chief Financial Officer James McKinney, appeared to have triggered a slide in the stock from its high of $22.86 on August 9.
McKinney had spent less than a year on the job, and left for personal reasons.
Banc of California Inc (NYSE:BANC) allegedly had ties to trade California financier
Shares of the bank plunged after a short seller using the anonymous title of Aurelius alleged in a post on the financial blog Seeking Alpha that the bank had ties to Jason Galanis, a California financier who is held at New York’s Metropolitan Correctional Centre.
“The totality of our research establishes that BANC has a broad mosaic of ties to the notorious fraudster Jason Galanis,” writes Aurelius. “In light of Galanis’ demonstrated history of secretly gaining control of publicly traded companies and large financial institutions, we believe there is a material risk that Galanis gained control of Banc of California.”
“Our belief is strengthened by the striking parallels between BANC and Galanis’ Gerova Financial which left unsuspecting investors with enormous losses as part of a giant fraud… As a result we believe Banc of California is simply under-investable.”
In the blog post, the author says that the aforesaid Jason Galanis controlled Cor Capital, BANC’s founding shareholder. Cor apparently led the recapitalization of LA-based regional bank First Pactrust.
Steven Sugarman is the Managing Member of Cor Capital, the author alleges, and is also the Chairman, President and CEO of the Banc of California.
Banc of California Inc (NYSE:BANC) responds
In an update today, the Banc of California said it had been investigating, through its Disinterested Directors, “matters relating to Jason Galanis including certain claims he had made suggesting an affiliation with members of the Company, its Board, and/or its Executive team.”
“The complaint filed by the Department of Justice against Mr. Galanis and others dated May 9, 2016, which is found here, clearly states that Mr. Galanis’ claims to be affiliated with COR Capital were fraudulent.”