UPDATE: This story includes comments from a spokesperson for Anthony Gressak III.

The former interim CEO of a small Southern California bank was banned from working in banking and fined $75,000 after allegedly fraudulently obtaining emergency relief funds. pandemic, among other harms.

Anthony R. Gressak III resigned in 2022 as interim CEO of Irvine, Calif.-based Nano Banc, which he co-founded and where he had also served as director and chief credit officer.

The Federal Reserve announced sanctions Tuesday against Gressak and another former Nano Banc director, James T. Chung.

The allegations against the two men connect some of the various regulatory issues the $958 million-asset bank has faced since 2021.

The Fed said Gressak, who was the partial owner of a group of companies that received about $15.5 million under the Coronavirus Aid, Relief, and Economic Security Act of 2020, had participated in materially false statements in applications for these funds, and that he accepted some of the money for personal expenses.

The central bank also alleged that Gressak acted inappropriately in some of its transactions involving Nano Banc.

For example, Gressak hid from the Fed and the bank’s board that he received nearly $195,000 in commissions in connection with the company’s approximately $37 million capital raise in 2020, according to the central bank.

The Fed said Gressak and the bank’s other founders formulated a plan that would provide them with a commission on the 2020 capital raise, even though the underwriting agreement with investors indicated the bank’s executives would not receive no commission.

Under the Fed’s consent order with Chung, he is also prohibited from participating in the banking industry. The Fed alleges that Chung, like Gressak, fraudulently obtained pandemic relief funds.

Chung and Gressak neither admitted nor denied the Fed’s allegations, but they agreed to comply with the orders and waived their right to contest them.

Chung could not immediately be reached for comment. A spokesperson for Gressak said the former Nano Banc executive had left the banking industry and wanted to put his interactions with the Fed behind him.

“He made decisions based on the advice of highly regarded external regulatory advisors and regulator-approved executives,” Gressak’s spokesperson said in a written statement. “He looks forward to embarking on his future endeavors and working alongside effective colleagues to build great businesses.”

Gressak’s spokesperson also defended his client’s record at Nano Banc, which he said included transforming the company into a “profitable, well-capitalized business with strong liquidity and a track record of loans efficient”.

In July 2024, Nano Banc named a new President and CEO, Mary Lynn Lenz, and a new Chair of the Board of Directors, Lynn McKenzie-Tallerico.

Lenz said in a written statement Tuesday, “Over the past several years, Nano Banc has evolved its leadership, creating a talented team imbued with integrity, accountability and transparency.”

Nano Banc, founded as a financial technology company aimed at eliminating fraud in the wire transfer industry, became a bank in 2018 by acquiring Commerce Bank of Temecula Valley.

The bank found itself in a tricky situation in early 2021, when both the Fed and the California Department of Financial Protection and Innovation took enforcement action related to its high level of commercial real estate lending. California regulators also required the bank to notify state officials in writing each time it proposed to employ someone as a senior executive.

A few months later, California’s DFPI issued a cease and desist order alleging that Nano Banc violated the previous order by replacing a slate of board members and appointing a new CEO without the required notification.

Then in January 2022, the Fed hit Nano Banc with another cease and desist orderwhich was intended in part to improve oversight of executive loans.

The timing of these events matches the allegations revealed by the Fed on Tuesday. The Fed said Gressak became interim CEO of the bank in 2021 before stepping down in February 2022 as an officer and director.

One of the Fed’s allegations is that Gressak participated in approving a salary advance to a bank employee in 2020, allowing the employee to inflate his income when seeking a loan.

In September 2022, Gressak entered into a consent order with the California DFPI regarding an alleged money transfer to an employee who was qualified as having a salary advance. The California order prohibits Gressak from participating in Nano Banc’s affairs without first receiving approval from the state regulatory agency.