Civil claims against Lake City Bank dropped in Khan case

Published: Jun. 1, 2023 at 5:53 PM EDT
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WARSAW, Ind. (WNDU) - Lake City Bank is getting civil claims dropped after accusations they benefitted from a check-kiting scheme.

It all started with Edwardsburg resident Najeeb Khan, who used his Elkhart-based payroll company to conduct fraud from 2011 to 2019, causing an estimated $150 million financial loss.

But Lake City Bank, which has home offices in Warsaw, was also accused of cooperating with the scheme because they collected millions in negative balance fees from Khan’s company.

The U.S. Bankruptcy Court for the Western District of Michigan was seeking $73 million from the bank, but this week they granted a motion to dismiss certain civil claims.

The CEO of Lake City Bank called the court’s opinion the “first step” in bringing “false allegations” against them to “an appropriate resolution.”

Meanwhile, sentencing in the criminal case against Khan has been delayed. He’s expected to learn his fate in November after pleading guilty to bank fraud and attempted tax evasion.