In 2021, as the dust began to settle after the deadly Jan. 6 attack on the Capitol, Donald Trump found himself without corporate allies.
Shocked by the violence that followed efforts to overturn the U.S. presidential election, companies at home and abroad are suspending political donations and reevaluating their relationships with outgoing leaders. Even Deutsche Bank, which supported the Trump Organization for two decades, has decided to no longer do business with the disgraced politician.
But with the loss of German support, a medium-sized California-based bank stood ready to fill the fiscal vacuum.
Since then, Axos Financial has become one of President Trump’s biggest financial backers. With subprime car tycoon and billionaire Don Hankey as its largest individual shareholder, the New York Stock Exchange-listed company has loaned the returning president and his company more than $400m (£318m). I have been supporting.
And investors are betting that Axos will grow under a returning president, pushing the stock to a record high above $80 after November’s U.S. presidential election.
Axos was one of the first digital banks in the United States, founded during the peak of the dot-com bubble in the early 2000s. At the time, it was known as Bank of Internet USA (BoI) and offered customers 24/7 online access to their bank accounts, even on holidays. This point is illustrated by the fact that it was founded on July 4, 2000, Independence Day.
After weathering the storm of the 2007-2008 financial crisis, BoI undertook a series of acquisitions under President and Chief Executive Officer Gregory Galabrants, who expanded its banking activities into clearing and investments. contributed to.
Since Garabrantz took over, the group’s assets have soared from just over $1 billion to $36 billion, and profits have hit record highs every year since 2012. And the 53-year-old McKinsey and Goldman Sachs graduate has been reaping big rewards over the years. method.
Despite owning a small portion of JPMorgan’s $3.7 trillion worth of assets, Garabrants paid a dividend of $34.5 million in 2018, paying off its famously highly paid president, Jamie Dimon. exceeded temporarily.
Axos said the amount includes the potential value of future stock-based bonuses, which take several years to vest and cannot be compared “on an apples-to-apples basis” with other bank executives. emphasized.
Mr. Garabrantz’s total salary has since decreased to $10.6 million, but he remains one of the top 10 highest-paid bankers in the United States.
Not everything was smooth sailing. The company has been involved in a series of legal battles with former employees and contractors, and was investigated by the U.S. regulator Securities and Exchange Commission (SEC) for two years starting in 2015 over alleged conflicts of interest and auditing practices. was.
Axos said it all stemmed from a smear campaign posted online starting in 2015 that included “hit pieces” and “unsubstantiated allegations,” which led to “anonymous and completely fraudulent complaints” to regulators. ”, he said. This is done in the hope of inciting an investigation, which could be used by short sellers to raise further suspicions about the company and cause the company’s stock price to decline.
The SEC investigation ended without enforcement action in 2017, just before the bank rebranded to Axos in 2018.
The group said its largest customers include some of the world’s largest hedge funds and private debt funds, which are “very well-banked by competitors large and small.” But Garabrantz, who told Bloomberg that discriminating against customers on the basis of politics “undermines the fabric of our civil society,” offers customers services that might turn them off from other lenders. It made headlines for doing so.
Axos at one point held funds associated with Free Speech Systems, a media company run by far-right conspiracy theorist Alex Jones. Jones filed for bankruptcy in 2022, owing $1.5 billion to his parents over conspiracy theories he spread about the 2012 Sandy Hook school massacre. Axos said the account was opened through its Insolvency Services Division on behalf of a court-appointed administrator. The company closed the account last year due to a series of fraudulent transactions.
It has also expanded into riskier areas, offering temporary accounts to crypto companies such as Binance US, which Binance’s parent company says is an “elaborate scheme to circumvent U.S. federal securities laws.” has been accused by the SEC of operating a Binance said the SEC’s actions were “unreasonable.” Axos said it has no remaining transactions with any crypto companies.
Meanwhile, Mr. Trump, who remains a customer, turned to Axos as loans for Trump Tower and the Trump National Doral hotel and golf resort in Miami were coming due. Axos ultimately provided $225 million to the then-ousted president in 2022, just before the loan was due to expire.
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The chief executive’s support clearly made an impression on the Trump family, including the president-elect’s son, Eric Trump, who said: “It’s an honor to call Greg a friend.”
An Axos spokesperson said the Trump Organization is an “exemplary borrower that has met all obligations in a highly professional manner.”
Mr. Hankey himself received help from someone who made his fortune selling high-interest car loans to people with bad credit.
One of Hankey’s companies, Knight Specialty Insurance, tried to appeal a $454 million court judgment accusing President Trump of lying and defrauding bankers and insurance companies. Posted the $175 million bail necessary to prevent a massive civil fraud judgment. About his wealth.
Further support is provided through political donations. Hankey made $80,000 in political contributions to Trump and the Republican Party in 2016, and Garabrantz’s 2020 donations include $4,800 to Trump.
But despite Axos’ consistent profit growth, not everyone is cheering its success. In June, short-selling investment firm Hindenburg Research accused the group of lax underwriting standards and serious problems with its loan portfolio.
The company said Axos is exposed to some of the riskiest asset classes, including commercial real estate, that its peers have refused to lend to, and that its customer base includes “borrowers who cannot obtain financing from other banks.” He claimed that this resulted in problems with financing.
Axos strongly denied the allegations. “Hindenburg’s statements are false,” an Axos spokesperson said, adding that the company has “a very strong track record of maintaining one of the lowest loss rates in the banking industry for its commercial real estate loan portfolio.” Ta.
It added: “This report has also been proven wrong over time, as many of the loans cited in the report have been repaid or, if not repaid, are in progress.” Ta.
While Hindenburg’s accusations initially caused the stock to plummet, investors have clearly rebounded and are betting on its future success.
Mr. Hankey did not respond to requests for comment.
