KeyCorp risk losing up to $90m after disclosing fraudulent activities

Bank holding company KeyCorp saw its shares drop by 1.2 per cent after revealing suspected fraudulent behaviours by one of its customers.

KeyBank, a subsidiary of KeyCorp, made the claim in an 8-K filing, a form used to notify investors in public American public companies of specified events that may be important to shareholders or the United States Securities and Exchange Commission.

The filing alleged Interlogic Outsourcing, a payrolls processing company, had conducted “fraudulent activity associated with transactions conducted in the third quarter of 2019”, according to the CNBC.

Moreover, The South Bend Tribune also reported that KeyCorp alleged that Interlogic CEO Najeeb Khan knew the company would be unable to cover the transfers.

As a result, KeyCorp shares plummeted by 1.2 per cent, swiping roughly $213m from KeyCorp’s market cap. This would bring the market cap down from $17.74bn to $17.52bn.

But that could only be the beginning. KeyCorp stated in the 8-K filing: “The company continues to investigate this matter to determine the potential exposure to the company, which the company currently estimates could be up to $90m, net of tax.”

Although, KeyCorp continued to say the “ultimate financial impact could be lower and will depend, in part, on the company’s success in its efforts to recover the funds.”

The next step for KeyCorp is to “pursue all available sources of recovery and other means of mitigating the potential loss.” “The company is working with the appropriate law enforcement authorities in connection with this matter,” KeyCorp said in the filing. “The company may be limited in what information it can disclose due to the ongoing investigation. Based on the company’s review of the circumstances of the fraudulent activity, the company believes this incident is an isolated occurrence involving a single business relationship.”

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