What: Shares of Internet bank BofI Holding (NYSE:AX) dropped nearly 30% after today's market open. The New York Times reported that one of the bank's former auditors sued the bank for firing him "after revealing what he believed to be wrongdoing at the bank to federal regulators and management at Bank of Internet."

So what: In one example of alleged wrongdoing, The New York Times piece suggests that BofI Holding told regulators that none of its accounts lacked tax identification numbers. Matt Erhart, the former auditor, alleged that he saw a spreadsheet of more than 200 accounts that lacked tax identification numbers while working at the bank. In an interview with the Times, BofI Holding CEO Greg Garrabrants said the claims were groundless.

On a conference call in September, Garrabrants used some of the time to discuss the exit of two auditors within the bank:

The Office of the Comptroller of Currency happened to be conducting a full-scope audit, and had around 20-30 people on site for around two months after these auditors left the bank. Given the OCC was on site during, and for several months after, the departure of these two auditors, the two auditors were provided sufficient opportunities to discuss any concerns they had two months before the OCC concluded their prior examination.

Garrabrants also noted that after the internal auditors spoke to the OCC "in great detail" that "the OCC had finished their review of any issues, are performing no further review, and no action is being taken based on any information presented."

Now what: This is certain to be a rather ugly back-and-forth between a former employee and the CEO of a bank that has been a favorite among short sellers. But this is a developing story, and it's likely that BofI Holding and its ex-employee will comment further on the case in due time. For now, the market seems content to simply sell first and asking questions later, given the steep midday decline in the company's shares. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.