United States v. Sterling Bancorp, Inc.

On March 15, 2023, the Department of Justice, Criminal Division, Fraud Section signed and announced a guilty plea with Defendant Sterling Bancorp, Inc. for securities fraud.  In connection with its October 2017 IPO, Sterling Bancorp, Inc.—a Detroit-based community bank with branches throughout the United States—issued a false and misleading public offering statement (SEC Form S-1) regarding its marquee lending program, the “Advantage Loan Program.”   Although the bank touted this loan program, which in turn was a significant driver of the bank’s increased and sustained revenue, a major number of the loans issued through the ALP were the product of fraudulent documentation.  Bank insiders (including its founder, Scott Seligman), made approximately $100 million in stock gains in connection with the IPO.  The false statements were reiterated in the bank’s subsequent annual filings in 2018 and 2019 (SEC Form 10-K).  In 2020, the fraud came to light through a bank examination, and the stock price dropped, causing shareholders approximately $69 million in losses.

Monetary Amounts and Key Terms:

• Guilty Plea – enhanced compliance self-reporting
  • $0 – Fine
    • No fine based upon inability to pay ($62,100,000 otherwise)
  • $27,200,000 – Restitution
    • Amount reduced based upon inability to pay ($56,600,000 otherwise)
• Global Resolution?: No
• Total Global Monetary Amounts: $27,200,000 (DOJ MIMF)
• Total U.S. Monetary Amounts: $27,200,000
• U.S. Criminal Monetary Amounts: $27,200,000