Medallion Financial: Frequently Asked Questions

In 2021, the SEC filed a federal lawsuit against Medallion Financial and Andrew Murstein — now the Company's CEO — alleging two fraudulent schemes. The first involved secretly paying people to post hundreds of promotional articles about Medallion stock online without disclosing they were being paid, a practice known as illegal "touting." When journalists exposed the scheme, the SEC alleged Mr. Murstein falsely denied knowledge of it and paid a promoter hush money to stay quiet. The second involved inflating the reported value of Medallion Bank by hundreds of millions of dollars — firing the independent valuation firm when it refused to certify his numbers, then offering a replacement firm future investment banking work in exchange for the valuation he needed. The result, the SEC alleged, was that Medallion's balance sheet overstated its assets by more than $140 million and stockholders' equity by more than $115 million. The relevant filings are available above.

On May 30, 2025, a federal judge entered a Final Judgment permanently enjoining both Medallion and Mr. Murstein from making false or misleading statements to investors and misleading the Company's auditors. Medallion paid a $3,000,000 civil penalty; Mr. Murstein is personally paying $1,000,000 in installments — money he cannot recover through insurance, indemnification, or a personal bankruptcy. Solely for purposes of nondischargeability in bankruptcy, Mr. Murstein agreed in writing that "the allegations in the Amended Complaint are true and admitted by Murstein." The court also required Medallion to hire an Independent Compliance Consultant and create a new Chief Compliance Officer reporting to the Board's Audit Committee — both of which remain in effect today under continuing federal court jurisdiction.

Less than eight months after a federal court permanently enjoined him for securities violations at this same company, Mr. Murstein was appointed CEO — without a stockholder vote and without any public explanation of how the Board evaluated his fitness. He now oversees the same investor communications, financial reporting, and auditor relationships that were the subject of the SEC's findings. Every statement he makes to investors — on earnings calls, in stockholder letters, or in direct conversations — occurs against the backdrop of a permanent 10b-5 injunction that exposes him to contempt proceedings before the same federal judge if he makes materially false or misleading statements. That order extends to everyone acting on Medallion's behalf, including the Board and its proxy solicitation agents. The conflict is structural, documented, and of the Board's own making: it chose to install Mr. Murstein as CEO without stockholder input while simultaneously adopting bylaw amendments that make Board accountability harder to achieve. Stockholders should weigh that choice carefully when evaluating everything they hear from Medallion in connection with the Company's governance and management.

The settlement uses standard "neither admits nor denies" language, which is typical for SEC consent settlements. But there is one significant exception.

The exception — the Section 523 stipulation. As a condition of the settlement, Mr. Murstein stipulated — solely for purposes of the federal bankruptcy non-dischargeability statute (11 U.S.C. § 523(a)(19)) — that "the allegations in the Amended Complaint are true and admitted by Murstein." The practical effect: Mr. Murstein's $1,000,000 personal civil penalty cannot be discharged in any future personal bankruptcy proceeding. This stipulation stands alongside the standard "neither admits nor denies" language and is on the public record.

The Final Judgment runs eleven paragraphs. Five of them apply directly to Mr. Murstein personally. The substantive provisions fall into four categories.

Permanent injunctions against Mr. Murstein. The Court permanently enjoined Mr. Murstein from violating six federal securities-law provisions: Section 10(b) and Rule 10b-5 (the principal federal anti-fraud rule), Sections 17(a)(1) and 17(a)(3) of the Securities Act, Section 17(b) of the Securities Act (the anti-touting rule), Rule 13b2-2 (false statements to auditors), and from aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) and (B) of the Exchange Act (the federal books-and-records and internal-controls obligations of public companies). Each injunction is permanent and binds Mr. Murstein personally for the rest of his life. Any future violation can be pursued as contempt of the existing court order, before the same federal judge.

Civil penalties. Medallion Financial Corp. paid a civil monetary penalty of $3,000,000 to the U.S. Treasury. Andrew Murstein is separately paying $1,000,000 personally, in four equal $250,000 installments. The final installment was due on or about May 25, 2026, approximately two weeks before the 2026 Annual Meeting. Neither Medallion nor Mr. Murstein may seek or accept reimbursement or indemnification for these penalties from any source, including insurance, and neither may claim a tax deduction or tax credit for any penalty paid.

A court-mandated compliance program. The Court required Medallion to retain an Independent Compliance Consultant to review the Company's policies, procedures, internal controls, and systems concerning compliance with federal securities laws, with written reports submitted to Medallion and to the SEC Staff. Medallion is also required to create a new Chief Compliance Officer role, reporting to the General Counsel, with a dotted reporting line directly to the Chair of the Audit Committee. The CCO reports quarterly to the Audit Committee on significant compliance issues and may be removed only with Audit Committee approval. Both requirements are court-mandated and operate under continuing federal court jurisdiction.

The Section 523 stipulation. As described in the previous question above, Mr. Murstein stipulated — solely for federal bankruptcy non-dischargeability purposes — that the allegations in the Amended Complaint are true and admitted by him.

Less than eight months after the Final Judgment was entered, the same Board of Directors that stockholders were being asked to re-elect promoted Andrew Murstein from President to Chief Executive Officer of Medallion Financial Corp. The appointment was made effective January 31, 2026, without a stockholder vote and without public explanation of how the Board evaluated his fitness for the role in light of the federal judgment.

Medallion's preliminary proxy statement, filed April 17, 2026, asked stockholders to vote on three Class III directors, on an advisory "say-on-pay" resolution for executive compensation, and on the ratification of the Company's auditor. The proxy statement did not disclose the Final Judgment, the permanent injunctions, the $1,000,000 personal civil penalty, the Section 523 stipulation, the Independent Compliance Consultant requirement, the court-mandated Chief Compliance Officer role, or the Audit Committee's court-mandated compliance oversight responsibilities.

The SEC's own disclosure rules require public companies to surface judicial findings or orders relating to securities-law violations that are "material to an evaluation of the ability or integrity of any director, person nominated to become a director or executive officer." The Final Judgment is the kind of fact that rule was written to surface.

We are aware of no other public-company CEO in the Russell 2000 who has retained the chief-executive role after a federal court entered a securities-fraud judgment against them personally. If one of our 2026 nominees had a federal court enter a securities-fraud judgment against them, Medallion's own nominating committee would not have considered them.

The SEC's allegations in the Amended Complaint cover Medallion's conduct during the 2015–2017 period. Alvin Murstein — Andrew Murstein's father — served as Medallion Financial Corp.'s Chairman and Chief Executive Officer throughout that period. He stood for re-election as a Class III director at the 2026 Annual Meeting.

His director biography in the Company's preliminary proxy statement describes his 60-year career, his service as Chairman since 1995 and CEO from 1996 through January 31, 2026, and his educational background. The biography does not reference the SEC matter, the Final Judgment, or his role during the period to which the SEC's allegations relate.

Separately, one of the other Class III nominees that stood for re-election in 2026, Cynthia Hallenbeck, is on the Company's Audit Committee — the same committee that now has direct court-mandated responsibility for oversight of the Independent Compliance Consultant and the new Chief Compliance Officer. The proxy statement's discussion of Board committees did not disclose this court-mandated oversight role.

Restore the Shine is a campaign by BIMIZCI — composed of BIMIZCI Fund LLC, ZimCal Asset Management LLC ("ZimCal"), Warnke Investments LLC, and Stephen Hodges — to increase the value of Medallion Financial Corp. (NASDAQ: MFIN) by improving its board, leadership team and business strategy.

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We believe Medallion Financial has significantly underperformed its potential. Medallion's stock trades at substantial discounts to peers, and the Company's executives have been paid tens of millions in bonuses over the last several years while returns, stock performance, and valuations have weakened. In almost every key metric, Medallion has underperformed its self-selected proxy peers, similar-sized commercial banks and the Russell 2000.

A proxy contest is not how we typically operate. ZimCal usually engages directly with bank leadership teams in a constructive way. In Stephen Hodges's 16-year investing career, he has never been an activist or publicly advocated for change at a company in which he has been invested — with the exception of Medallion.

We first attempted to engage Medallion's leadership privately in late 2023, concerned about how their actions were negatively impacting the value of our investment. After our concerns were rejected, we concluded that the path to restoring stockholder value ran through changes to the Board.

Yes. Stephen Hodges and ZimCal, the manager of BIMIZCI, nominated two director candidates at Medallion's 2024 Annual Meeting. Although those nominees were not elected, the campaign brought public attention to corporate governance concerns at the Company. With only modest stockholdings, we still secured 22% of the votes, with a substantial portion of the votes against us coming from insiders and their affiliates. 1 in 4 shares was voted against management's egregious compensation. The 2026 contest expanded that effort to a slate of three excellent nominees with a far larger stock ownership.

Outside of Medallion, Stephen Hodges and ZimCal have never run a proxy contest or publicly advocated for change at any of the more than 120 financial institutions in which they have invested over the last 16 years.

ZimCal and its affiliates have been Medallion Financial investors for five years. At peak investment in June 2026, we owned 530,250 shares of common stock and $15 million (par value) trust preferred securities issued by Medallion.

nicole@nh-consult.com

info@restoretheshine.com