A failed Tennessee bank is facing a potential class-action lawsuit.

Investors are suing the former Tennessee Commerce Bank, which failed in January after becoming critically undercapitalized, for violating federal securities laws, a law firm that filed the lawsuit said Friday.

The suit, which seeks class-action status, contends that the $1.2 billion-asset Tennessee Commerce misled investors who purchased stock in the bank over a roughly three-and-a-half year period beginning in April 2008 about its financial condition.

Tennessee Commerce failed to disclose “serious internal control deficiencies causing it to be unable to monitor its loan portfolio,” the Rosen Law Firm, which filed the suit, said in a news release.

Based in Franklin, Tennessee Commerce had built a niche in equipment financing. Regulators seized it after it was unable to raise additional equity to replace its depleted capital. Since then the Federal Deposit Insurance Corp. has held a series of auctions of Tennessee Commerce’s assets.

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