SAN FRANCISCO (AP) — Failed online credit card issuer NextCard Inc. disclosed Friday that federal securities regulators are investigating the company's downfall, which could cost a taxpayer-backed insurance fund as much as $400 million.
The San Francisco-based company also revealed that its chief executive, John Hashman, resigned earlier this week. Hashman oversaw NextCard's rise and fall as the Internet's biggest credit card issuer.
After distributing more than 1 million credit cards, NextCard last year sank in a morass of bad loans that prompted banking regulators to seize control of the operations. The Federal Deposit Insurance Corp. has estimated the failure of NextCard's credit card business will result in a loss ranging from $300 million to $400 million. Federal banking regulators opened investigations into NextCard's failure seven months ago. In May, the FDIC notified NextCard that it might take legal action against several unnamed company executives and directors.
A shareholder suit filed in Delaware alleges NextCard insiders illegally sold stock to lock in profits before the company's credit card portfolio imploded.