Irvine-based Banc of California Inc. faces a class-action suit seeking to recover damages for market losses related to the company's alleged ties to Jason Galanis.
The lawsuit was filed on behalf of Fernando Garcia and other investors who acquired securities from Oct. 29, 2015, to Jan. 20. It alleges that the defendants — Banc of California, Sugarman, and former company CFOs Ronald Nicolas Jr. and James McKinney — misled investors and failed to disclose the company's connections to Galanis.
In October 2016, a Seeking Alpha post claimed that the company's senior executives and board members had ties with Jason Galanis, who pleaded guilty in July 2016 to market manipulation and several charges of fraud. For its part, Banc of California said it was aware of these matters since 2015 and had immediately launched an independent investigation.
On Jan. 23, the company announced that Steven Sugarman, the company's chairman and CEO, has resigned. His resignation came more than a week after the SEC started its own probe on the blog allegations and issued a subpoena on Jan. 12.
On news of the alleged ties to Galanis, Banc of California's stock price fell $4.61 per share, or 29%, to close at $11.26 per share on Oct. 18, 2016, according to the lawsuit. Company shares also dropped on news of Sugarman's resignation, falling $1.50 per share, or nearly 10%, to close at $14.65 per share on Jan. 23.
The stock rose to $15.70 to close trading on Jan. 24.