The liquidating trustee for bankrupt Centrix Financial has asked the U.S. District Court of Colorado to slap the defunct lender with a $15 million fine for allegedly lying about its finances to secure a 2014 settlement.
Jeffrey Weinman, the trustee on behalf of Centrix Financial Liquidating Trust, filed a motion on Oct. 21 claiming that Centrix Chief Executive Robert Sutton and his family lied about their finances in order to obtain a deal that had Sutton shell out $350,000 to creditors to resolve more than $100 million losses.
Weinman spent years researching Centrix’s finances and discovered that Sutton hid “approximately $20 million worth of assets in shell entities” during litigation for the 2014 settlement, according to the court filing. “The fruits of the discovery confirm that the Suttons’ financial disclosures were spectacularly fraudulent,” the filing noted.
Before shuttering its operations, Centrix originated loans for various car dealerships using money from several credit unions, the filing noted. Centrix “fleeced” the credit unions of more than $100 million by promising a return of 6% to 8% and claiming that all loans were insured and underwent a due diligence process, according to court documents. Instead, the loans had an “astonishing default rate of over 40%,” Weinman found.
Upon discovering the scheme, creditors placed Centrix in involuntary bankruptcy.
A full financial investigation in the bankruptcy revealed that Centrix was asset-less, having been “bled dry” by Sutton, according to the motion. As a result, the bankruptcy court authorized the creation of a liquidating trust, the main assets of which were litigation claims against Sutton and his family members and entities to whom he had fraudulently transferred Centrix’s assets. “Monetizing those litigation claims would be effectively the only source of recovery for creditors,” the filing noted.