Vesttoo begins Chapter 11 proceedings

Crisis-hit Vesttoo Ltd. and its subsidiaries have begun Chapter 11 bankruptcy proceedings with the goal of protecting its assets and enabling it to pursue legal action against the perpetrators of fraudulent letters of credit.

Israel-based Vesttoo’s action came after it was revealed that it was being sued in US federal court today by a subsidiary of Aon. A hearing on that case seeking to freeze Vesttoo’s US assets takes place in New York’s Southern District court today.

Vesttoo said last night that it had commenced Chapter 11 proceedings in the United States Court for the District of Delaware.

“With the protection of Chapter 11, the company’s platform and current capital structure remain stable and fully sustainable, and the Vesttoo Board of Directors confirms it does not intend on liquidating the company as a result of the proceedings” Vesttoo said.

“Rather, the board intends to emerge from this process a stronger partner to all of our stakeholders, including our employees, customers, and vendors, in the years to come.”

It added: “In light of the various allegations related to the fraudulent letters of credit (LOCs) used on Vesttoo’s platform, the company determined that Chapter 11 was necessary to protect Vesttoo’s assets and serve as a forum to pursue legal action against those responsible for the company’s current situation.

“This will enable Vesttoo to develop its business plan moving forward under the company’s Board of Directors. Furthermore, it will provide the company with protection from its creditors, strengthen its business and facilitate its restructuring plan while maintaining normal business operations.”

Newly appointed chief executive officer Ami Barlev said: "We believe the steps we are taking are best for Vesttoo’s long-term growth and success.

“Not only will they result in a strong, more sustainable capital structure, but they will provide us with the platform to aggressively pursue all parties that harmed our business.

“We fully believe that Vesttoo’s unique core technology and experienced team, coupled with the needs of the market, constitute a strong base for rebuilding the company better and stronger than before.”

Vesttoo was plunged into crisis after it was revealed that fraudulent letters of credit purportedly from China Construction Bank had been used as collateral in reinsurance transactions.

Vesttoo, which used artificial intelligence to link cedants and investors in reinsurance transactions, has been forced to lay off 150 of its 200 staff. Its Bermuda based collateral reinsurer has also been forced into liquidation.