What: Shares of BofI Holding (NASDAQ:AX) are plunging Thursday, trading down by 13% as of 10:30 a.m. EST.

So what: The stock is likely reacting to the circulation of a class action suit against BofI Holding and some of its executive officers filed by the Houston Municipal Employees Pension System.

The plaintiff alleges that BofI Holding engaged in unlawful lending practices, violated federal laws in identifying its customers, and failed to maintain adequate controls over its operations, among various other, more specific, allegations.

The filing references several interviews with former BofI Holding employees, who it identifies only as numbered confidential witnesses. One is quoted as saying "internal controls were whatever Greg [Garrabrants] wanted them to be...We have internal controls on paper, but were they ever followed? No." Greg Garrabrants is the bank's Chief Executive Officer. 

Another confidential witness, who became uncomfortable with the company's lending practices while working for the company, said that "it started to become very rare that we would deny a loan." Yet another witness suggested that BofI Holding's management made decisions based on how it would appear in the company's quarterly and annual reports for shareholders.

One potentially very damaging revelation is that one former employee observed that BofI Holding was using one appraiser for its multifamily loans. In one instance, the appraiser called the former BofI underwriter and stated that the property needed to be appraised for $18 million to satisfy BofI Holding's requirement for a loan-to-value ratio to fund the loan.

Now what: BofI Holding's business model and operations have come under scrutiny from investors after a former auditor filed suit against the company in late 2015, believing he had been fired for revealing wrongdoing to federal regulators and BofI Holding management.

These class action documents, which detail conversations with several former BofI Holding employees, suggests that the auditor who sued the company in 2015 was not alone in worrying about the bank's business practices, reinvigorating investor concerns from last fall.