The Federal Reserve has barred the former interim CEO of Irvine, California-based Nano Banc from the banking industry for fraudulently obtaining COVID-era loans, among other violations, the central bank said Tuesday.
Anthony R. Gressak III, the ex-CEO, and James T. Chung, a Nano Banc board member, served as partial owners of a group of corporate entities that received roughly $15.5 million in Paycheck Protection Program, Economic Injury Disaster Loan and Restaurant Revitalization Fund money, the Fed said.
Between March 2020 and February 2022, Gressak and Chung made materially false representations on the COVID aid applications and used a portion of the funds for personal expenses, the central bank asserted. That constituted unsafe and unsound bank practices and a breach of fiduciary duty, the Fed argued.
The Fed fined Gressak $75,000 and barred Chung from the banking industry, as well.
But the allegations against Gressak run deeper.
The San Francisco Fed issued an enforcement action against Nano in February 2021 over the bank’s relatively high proportion of commercial real estate loans. That order required Nano to notify the regulator 30 days before appointing a new board member or senior executive officer.
Nano, however, failed to notify the San Francisco Fed when Gressak organized and voted in favor of shareholder action that caused the bank to name a new CEO and slate of directors, the Fed said Tuesday. That action would have aligned with when Gressak became acting interim CEO at Nano. He previously was the bank’s chief credit officer.
In that role, Gressak appears to have landed in the Fed’s sights, too. As part of a roughly $37 million capital raise in 2020, Gressak and other Nano founders hatched a plan to receive commissions on the investments, even though a subscription agreement with investors indicated they would not, the Fed said.
Gressak received $194,704.67 in commissions for obtaining capital investments, the Fed said, including a $100,000 cash advance through the bank two months before the capital was funded.
Gressak concealed that commission from the boards of Nano and its holding company, and from the San Francisco Fed, the central bank said.
Further, another cash advance caught the regulator’s attention. Gressak helped approve a $148,000 payroll advance to another of Nano’s executive officers – allegedly so the employee could inflate his income to obtain a loan March 24, 2020, at the height of the COVID-19 pandemic, the Fed said Tuesday.
Gressak resigned in February 2022.
Gressak and Chung did not admit or deny the Fed’s allegations, but they agreed to comply with the orders and waived their rights to challenge them.
“He made decisions based on the advice of highly reputable outside regulatory counsel and executives approved by regulators,” a spokesman for Gressak wrote to American Banker on Tuesday, adding that he had transitioned from banking and wanted to put the Fed matter behind him. “He is looking forward to his future endeavors and working alongside effective colleagues to build great companies.”
Chung could not immediately be reached for comment.
Nano Banc began as a fintech with the mission to curb fraud in the wire-transfer sector. It bought Murrieta, California-based Commerce Bank of Temecula Valley in 2018 to obtain its banking charter. Nano named a new CEO and board chair in July.
“Over the last several years, Nano Banc has transitioned leadership, creating a talented team of integrity, accountability and transparency,” CEO Mary Lynn Lenz told American Banker in a statement.
