Item 3. Legal Proceedings
Item 3. Legal Proceedings.
1st Source and our subsidiaries are involved in various legal proceedings that are inherent risks of, or incidental to, the conduct of our businesses. Management does not expect the outcome of any such proceedings will have a material adverse effect on our consolidated financial position or results of operations. One such proceeding involves the consolidated bankruptcy cases of IOI Integrated Systems, Inc., its affiliates (collectively, “IOI”) and the owner of IOI, Najeeb Khan. The consolidated cases commenced in August 2019 and are pending in the United States Bankruptcy Court, Western District of Michigan, Southern Division. IOI and Mr. Khan were customers of 1st Source Bank. Mr. Khan was also a director of 1st Source and 1st Source Bank until his resignation on July 9, 2019. The liquidating trustee of the consolidated bankruptcy estates has alleged Mr. Khan misappropriated funds of IOI over many years for his own benefit and to the detriment of IOI creditors. The trustee is investigating whether various banks and other third parties, including 1st Source Bank, may have liability because of prior business relationships with IOI and/or Mr. Khan. The trustee’s focus regarding the Bank is on transaction activity in respective deposit accounts of Mr. Khan and entities controlled by Mr. Khan at the Bank. The Bank has fully cooperated with the trustee’s information requests. The trustee has variously asserted that the Bank received avoidable transfers under applicable federal bankruptcy and state law by virtue of transactions involving deposit accounts of Mr. Khan and IOI, and that the Bank had actual knowledge of and aided and abetted Mr. Khan’s fraudulent activity. No claims have previously been formally served on the Bank. The trustee had filed a complaint but withheld service of process and agreed to stay prosecution through February 28, 2022. Management expects the trustee may formally commence litigation against various parties including the Bank during the first or second quarters of 2022. The Bank will vigorously defend any claim that it was involved with and/or benefited from the alleged misconduct of Mr. Khan and/or IOI.
Item 4. Mine Safety Disclosures.
None
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Table of Contents
Part II
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.