They were selling unregistered securities and operating a Ponzi Scheme! They not only used investor money to support their personal lifestyle, but Peer Street also hindered borrowers payoffs to keep charging more fees. Through my investigation of investors and borrowers, I have found that Peer Street would not communicate with either side or try to force foreclosure or, worse, put borrowers in bankruptcy.

Investors must prepare for the 341 meeting of creditors and force the United States Trustees' office to do their job. Under 11 U.S.C. § 1104(a), the United States Trustee may seek the appointment of a Chapter 11 trustee to manage the financial affairs of a Chapter 11 debtor. A trustee must be put in place asap and deny any use of cash collateral.

The appointment of a Chapter 11 trustee is an extraordinary remedy based on a strong presumption in favor of leaving the debtor in possession. Nevertheless, in an appropriate case, “the appointment of a trustee is a power which is critical for the Court to exercise in order to preserve the integrity of the bankruptcy process and to ensure that the interests of creditors are preserved. The appointment of a Chapter 11 trustee should better serve creditors, shareholders, and the public interest by promoting efficiency, effectiveness, and transparency, traits that may have
been lost by current management. A trustee would evaluate and marshal the assets, identify claims, and make sober-minded business decisions about whether the debtors can reorganize. Third, because of the debtors lack the confidence of their secured creditors and the unsecured. Fourth, the benefits of appointing a trustee outweigh the costs.

Some pointers:

A. Under § 1104(a)(1), cause exists for the appointment.
Although § 1104(a)(1) provides fraud, dishonesty, incompetence, and gross mismanagement as specific examples of cause, but is not an exhaustive definition.

Under § 1104(a)(2), the best interests of creditors support the appointment of a trustee. Section § 1104(a)(2) also provides a basis for ordering the
appointment of a Chapter 11 trustee. The statute empowers the Court to consider the best interests of creditors as a reason for the appointment. Among the factors a court typically considers in this analysis are (1) the trustworthiness of the debtor; (2) the debtor’s
past and present performance and prospects for the debtor’s reorganization; (3) confidence, or lack thereof, of the business community and creditors in present management; and (4) the benefits derived by appointment of a trustee, balanced against the costs of appointment.

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