New York insurance regulators have opened an “official investigation” into the nation’s largest Obamacare health co-op for “substantial underreporting” of its financial condition, according to the New York Department of Financial Services.

DFS also is seeking to appoint an independent monitor to oversee the management of the failed health insurance co-op, called Health Republic of New York.

The swiftly unfolding crisis forced regulators to issue its extraordinary actions Sunday. Federal taxpayers are expected to pick up the tab for $355 million in losses due to Health Republic.

State regulators reported they had retained the public accounting firm of Alvarez & Marsell to take over the co-op to serve as the co-op’s Chief Restructuring Officer.  The firm also oversaw the closure of accounting giant Arthur Anderson.

The insurance regulators reported that, “NYDFS investigators are collecting and reviewing evidence relating to Health Republic’s substantial underreporting to NYDFS of its financial obligations. Among other issues, the investigation will examine the causes of the inaccurate representations to NYDFS regarding the company’s financial condition.”

The same regulators previously ordered Health Republic to cease issuing health insurance policies on September 25.  At the time they gave customers until the end of the year to find another insurance provider.

However, on October 30 when they first reported that Health Republic faced more dire financial conditions and that it had misled regulators, regulators told the co-op’s 215,000 poor and low-income customers they had to choose a new insurance company by November 15.

New York regulators also put into motion a series of auto-enrollment processes to allow customers to continue with insurance coverage.

The Obama administration awarded Health Republic $265 million in 2012 and issued an additional emergency $90 million more in September 2014 in “solvency funds.”

Health Republic is the largest of the 23 Obamacare co-ops in the country. It was founded by political activist Sarah Horowitz who first met then Senator Barack Obama when they both worked at the same think tank.

In addition to the $355 million she received from the Obama administration for her New York co-op, Horowitz also received an additional $111 million to create a New Jersey co-op and $62 million to establish a co-op in Oregon.

The Oregon co-op announced last month that it too would be closing its doors.

Health Republic is one of the 13 health co-ops to have failed in only two years of operation.