The Complaint brought forth claims for violations of the Securities Exchange Act of 1934 against Coast Financial Holdings, Inc. (“CFHI” or the “Company”), and certain of its senior executives. The Complaint alleged that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired CFHI securities during the Class Period.
CFHI is the parent company of Coast Bank of Florida (“Coast Bank”), a state-chartered commercial bank which provides a broad array of consumer and commercial banking services to individuals and small to mid-size businesses located in and around Manatee, Pinellas, Hillsborough and Pasco Counties, Florida. Coast Bank primarily derives its revenues from interest on, and fees received in connection with, real estate loans and other loans.
Specifically, the Complaint alleged Defendants concocted a quasi-ponzi scheme whereby CFHI and its partners would campaign to unsuspecting investors primarily located in the Northeast the possibility of making substantial profits with no money down. The investor simply had to lend his or her credit to finance the construction of a single-family home in “North Port,” Florida that the investor never intended to occupy, but that could be “flipped” or rented upon completion of construction. Unfortunately, the investors were never told that the scheme entailed CFHI financing the purchase of other land for continuing North Port marketing efforts with their money. This real estate scheme (hereinafter referred to as “the North Port Scheme”), was so successful that CFHI was able to report staggering year-over-year growth in the value of its loan portfolio and finance rapid expansion of CFHI. In the face of the North Port Scheme, Defendants nevertheless disseminated throughout the Class Period materially false and misleading statements and/or omitted to make material disclosures concerning the Company’s lending operations. When the truth of the North Port Scheme was initially revealed in January of 2007, the market reacted swiftly and severely. CFHI’s stock fell from a Class Period high of $18.90 to $8.68, a stunning fall of approximately 54%.
On June 22, 2007, the Court appointed Saxena White P.A. as Co-Lead Counsel. Lead Plaintiffs filed their Consolidated Class Action Complaint on August 24, 2007.
On March 13, 2008, the Court denied in part Defendants’ Motion to Dismiss. Lead Plaintiffs filed an Amended Consolidated Complaint on April 2, 2008. On June 6, 2008, the Court denied Defendants Motions to Dismiss the Amended Consolidated Complaint. The Court also denied Defendants motion requesting that the Court certify its order denying the motions for immediate appellate review.
On September 22, 2008, the Parties engaged in a day of arm’s-length mediation to settle the litigation. Further negotiations continued throughout the week, and on September 26, 2008, the Parties reached an agreement that enabled the Class to obtain a substantial recover of $6,349,000. On February 20, 2009, the Court preliminarily approved the settlement, and then on May 29, 2009, entered final judgment finding the settlement to be fair, reasonable and adequate in all respects.
