Metropolitan Bank has rescinded a nearly $7.5 million loan it made in March to its CEO, Mark DeFazio, because the loan was “likely impermissible” under applicable laws and regulations, the bank said in a Securities and Exchange Commission filing last week.
DeFazio borrowed the money at a fixed interest rate of 5.7% to purchase 220,200 shares of Metropolitan stock and to satisfy tax obligations in connections with the transaction, according to the filing.
The bank also canceled the stock purchase, according to the filing.
Metropolitan’s board of directors and outside counsel determined a separate loan — made to DeFazio in 2021 for $780,000 at 2.1% interest — was also “likely impermissible,” according to the filing.
Dave Nasatir, chair of the Philadelphia law firm Obermayer and of the firm’s business and finance department, told American Banker he believed the bank may have violated part of Regulation O, which regulates how credit is extended to bank insiders.
"My gut says they triggered something," Nasatir told the publication. "Regulation O is very detailed on giving loans to any senior officers of a company. The rules are so tough that the overwhelming majority of bank executives seek financing outside of their institutions."
A spokesperson for Metropolitan did not return a request for comment by press time.
Earlier this year, Metropolitan made public its plans to exit the crypto sector, which it had been aligned with for a number of years. At the time, DeFazio said the bank’s exit process from crypto began in 2017, before recent developments in the sector.
“Crypto-related clients, assets and deposits have never represented a material portion of the Company’s business,” he said, “and have never exposed the Company to material financial risks.”