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Wells Fargo approves paying shareholders $1B to settle suit

Banking And Finance

Wells Fargo approves paying shareholders $1B to settle suit

To settle a class-action lawsuit accusing Wells Fargo of overstating its progress in cleaning up post its 2016 fake-accounts scandal, the bank has agreed to pay $1 billion.

The bank’s shareholders alleged Wells Fargo and the bank’s previous leadership misled them about how swiftly they were repairing the risk management systems and the governance issues that failed to prevent the bank from creating perhaps millions of fake accounts.

After the 2016 scandal resulted in a series of regulatory reprimands, Wells Fargo moved far slower to solve the problems than the bank suggested publicly, as the shareholders alleged. According to the plaintiffs, when the slow pace became clear in 2020, stock-price declines cost shareholders, including pension and mutual funds.

The initial settlement, outlined in a court filing on the night of May 15, 2023, is slated to be approved in the coming months. According to the filing, it would likely be the 17th-largest settlement in a class-action lawsuit brought by shareholders.

The US-based bank, Wells Fargo, is still attempting to get its house in order and make the regulators happy. For over five years, Wells Fargo has been operating under a Federal Reserve imposed growth cap because it didn’t have adequate governance and controls.

In recent months, Wells Fargo has set aside billions of additional funds to resolve regulatory and litigation matters, and to compensate customers for mistakes tied to its scandals.

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