FORT LEE, N.J.— Cross River Bank here has, at least for now, beaten back a proposed investor class action tied to the collapse of solar lender Sunlight Financial, with a federal judge dismissing claims that the bank helped fuel Sunlight’s problems by originating or warehousing risky solar loans that allegedly were not properly reflected in the company’s financial picture.
The ruling is an early win for Cross River, though the case may not be over if plaintiffs try to amend or appeal, Law360 said.
According to Law360, the suit was brought by a Sunlight investor who alleged Cross River, as Sunlight’s bank partner in its solar loan program, participated in a scheme that allowed the company to extend credit to weak borrowers and keep a large volume of funded but unsold loans effectively “off balance sheet” while Sunlight retained the economic exposure. A securities-fraud filing notice from plaintiffs’ counsel last fall said the case covered investors who bought Sunlight securities between Jan. 25, 2021 and Oct. 31, 2023, and accused Cross River of helping Sunlight originate loans to “unscrupulous solar panel installers of dubious credit quality.”
The underlying business fallout has been significant. Reuters reported in October 2023 that Sunlight Financial filed for Chapter 11 bankruptcy and agreed to sell itself to a consortium of solar-industry investors, while Bloomberg reported at the time that Cross River agreed to provide $20 million in bankruptcy-exit financing as part of that restructuring. Public contract records also show Cross River and Sunlight entered an omnibus waiver agreement in late 2022 temporarily waiving certain defaults under their loan program and loan sale agreements, underscoring the strains in the relationship before Sunlight’s bankruptcy.