Vesttoo says non-Israel employees are not under suspicion in fraud

Embattled Israeli insurtech Vesttoo has stated that all employees of its overseas operations, including in Bermuda, and of its remaining core team are not under suspicion of being involved in the external fraud that has thrown the company into disarray.

The company also said that it has confirmed that the source of the use of fraudulent letters of credit was external to Vesttoo and the company expects to publish the results of its investigation shortly.

The company also welcomed news that courts in New York and Israel had unfrozen the company’s accounts following its application to enter Chapter 11 bankruptcy proceedings in the US.

A statement from the company said: “"We can also confirm that the investigation into the fraudulent LOCs used as collateral in the company’s transactions is in advanced stages, and the company hopes to be able to publish results in the near future.

“What we can already confirm is that the source of the fraud is external to Vesttoo, and no employees of Vesttoo UK, US, Bermuda, Japan, or other jurisdictions outside of Israel are under any suspicion of being involved in the fraudulent activities.

“We can firmly assure that Vesttoo’s remaining core team of professionals is free of any suspicion, and our company continues to operate because of these talented individuals."

The company added: "Vesttoo can confirm that the federal court in New York has removed the temporary restraining order freezing the company’s accounts on the 15th of August, and the Aon White Rock legal case was placed on the court’s suspense docket.

“The courts in Israel have followed suit, removing the temporary restraining order from the company’s accounts in Israel as well. The proceedings moving forward will fall under Chapter 11, which is aimed at providing the company with the ability to restructure the business and rebuild while pursuing legal action.”

New York District Judge Paul A. Engelmayer lifted a temporary restraining order freezing Vesttoo’s assets which had been granted after Aon subsidiary White Rock SAC argued there was an imminent threat of the company removing the funds.

White Rock is pursuing a claim for $137 million of funds from the crisis-hit company and has said it will be launching arbitration proceedings in Bermuda.

“At the hearing, counsel for respondents reported that all respondent entities have filed for bankruptcy,” Engelmayer said in a written ruling. “Accordingly, the Court vacates the temporary restraining order entered on August I 0, 2023, and places this case on its suspense docket.

“The Court shall retain jurisdiction over the case in the event that any respondent entity emerges from bankruptcy and petitioner renews its application for preliminary relief.”

Vesttoo applied to enter Chapter 11 proceedings in Delaware on Monday, saying bankruptcy protection gave it the best chance to preserve its assets and to pursue legal action against the parties which used fraudulent  letters of credit as collateral in reinsurance transactions.

Vesttoo has laid off 75% of its 200 employees, but said in court filings it is burning through $1.5 million a month as it tries to save the business.

Liquidation proceedings of Vesttoo’s Bermuda-based collateralised reinsurer are also underway.