Today Nasdaq listed blockchain firm Triterras announced that KPMG resigned as the firm’s ‘independent accountant’ – or rather its auditor – and the board is launching an independent investigation into allegations raised by a short seller report. The press release downplayed the KPMG news by leading with the independent investigation. Furthermore, reading the press release would likely lead to an interpretation that the departure was by mutual agreement, whereas KPMG resigned as auditors. We confirmed with Triterras that the resignation relates to the auditor role, not accounts preparation.
The company’s quarterly report to November 2020, its first since its listing, has not been audited, although listed firms are not required to have an audit for the quarterly report. But under the circumstances, it would provide added comfort.
As we previously reported, the blockchain trade and trade finance company faces a class-action lawsuit over related party transactions as well as a scathing report from short seller. These sorts of reports are designed to create profits if the stock price drops. The short report also focused on related party transactions as well as odd patterns of trades. Triterras merged with a Nasdaq listed SPAC Netfin in November 2020.
Spinning the announcement
Triterras was keen to emphasize that KPMG didn’t qualify its reports for the last two years. Here’s the part of the press release describing the resignation:
“The Company has also announced that they will be replacing KPMG LLP as the Company’s independent accountants. For some time, there has been consideration and discussion with respect to replacing the independent accountants of the Company for various considerations, including to further separate the operations of Triterras, Inc. from its related party company Atanium (formerly Rhodium Resources). KPMG LLP resigned as the Company’s independent accountants effective January 20, 2021.” The resignation sentence is almost 200 words into the press release.
Atanium / Rhodium is one of the related parties owned by Triterras CEO Srinivas Koneru, which was disclosed in the prospectus. Rhodium is a customer. It initially introduced all of Triterras’ client to the platform and owes Triterras $1.7 million.
But the SEC filing relating to the same topic was much more matter of fact and starts “On January 20, 2021, the Board of Directors of Triterras, Inc. (the “Company”) received formal notice that the Company’s independent auditors KPMG LLP (“KPMG”) had made the decision to resign as our independent accountants effective January 20, 2021.”
It goes on to assert that there were no disagreements with KPMG “on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure”. Which begs the question, why did KPMG resign?
Especially at this sensitive time for the company. Under the circumstances if KPMG could resign from either Triterras or Rhodium which is in financial trouble, you’d think both Triterras and KPMG would prefer it stayed with the listed company.
This news reveals two further pieces of information. The surprising fact that KPMG was involved with both Triterras and Rhodium at the time of the listing. And the SEC announcement says the only relevant reportable event was “material weaknesses in the Company’s internal control over financial reporting (the “Material Weaknesses”) as disclosed in the Company’s Registration Statement.”
Regarding the other announcement today, the Board’s Audit Committee plans to oversee an independent legal investigation into the short report allegations and is looking for a lawyer. It says it’s keen to set the record straight over ‘false and/or incomplete information included in the recent short report.”
Rhodium’s troubles preceded the Triterras listing
On December 17, 2020 Triterras announced that its customer and debtor Rhodium had applied to the Singapore courts to shield it from creditors while it restructures its debt. This followed a statutory demand for payment from Antanium Resources on December 1, 2020.
Triterras merged with a listed SPAC in November 2020. But Rhodium already had signs of financial challenges. In September 2020 it was sued by MayBank, Malaysia’s biggest bank, relating to $3.16 million for bills of exchange.
Update: The article was updated to clarify that the resignation relates to KPMG’s role as auditor. The company prepares the accounts itself.