Vesttoo assets frozen by New York court
The beleaguered fintech startup was handed another blow after all its assets, including bank accounts, were frozen at least until next week following a request by reinsurance broker Aon’s White Rock SAC
Under-fire fintech startup Vesttoo has had all its assets, including bank accounts, frozen by a New York court. The freeze is the result of reinsurance broker Aon’s White Rock SAC calling for an injunction due to what it claimed was an “apparent large-scale fraud scheme surrounding letters of credit provided by Vesttoo to collateralize reinsurance transactions facilitated by White Rock on behalf of its insurer clients.”
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The court has issued a temporary restraining order that means Vesttoo can’t move assets in its bank accounts, except for funds in the amount of $1,000,000, at least until a court hearing will be held on August 15th.
“The freezing of the company's assets in New York is only temporary, pending a hearing with both parties in court scheduled for next Tuesday,” the company said in a statement. “According to the assessment of the company’s lawyers, the U.S. court lacks jurisdiction to address procedures related to other territories. Vesttoo intends to utilize all available legal means to eliminate the obstacles that are impeding the company's ongoing efforts for recovery and growth. It's important to note that there is no concern about the company's ability to meet its obligations to employees and suppliers."
In the meantime, interim CEO Ami Barlev, named on Thursday as a replacement for Yaniv Bertele, who was in charge during the fake collateral scandal, announced on Friday that the international law firm engaged by Vesttoo to investigate the scandal has presented initial conclusions and recommendations.
“We have learned that a number of factors, external to the company, led directly to the current crisis, including the involvement of certain foreign banks and financial institutions,” Barlev said. “We will decisively pursue legal actions against all parties who caused harm to the company and its clients, and will take all necessary steps to recover all and any damages, and we will vigilantly protect our partners, customers and our employees.
“At this stage, we can firmly assure that Vesttoo’s remaining core team of professionals, who are of the highest caliber globally in the fields of insurance, capital markets and technology, are free of any suspicion, and our company continues to operate because of these talented individuals. We thank everyone who continues to support us.
“Vesttoo has tightened its KYC procedures and is adopting stringent legal procedures aimed at increasing the level of corporate governance and business integrity at the company.
“We will demonstrate zero tolerance towards any violation of law and pursue legal actions against any party that caused damage to the company in the most assertive manner.”
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Vesttoo - partly backed by Banco Santander's fintech venture capital arm Mouro Capital - said last week it was laying off about 75% of its staff and considering removing Bertele, following internal and external investigations into the events leading to the first report of a fraudulent letter of credit used in many transactions.
On Monday, it said it was in "active discussions" with potential investors to find alternative collateral for clients after discovering fake letters of credit had been used on its platform.
Vesttoo, which uses artificial intelligence technology to connect the insurance industry and capital markets, is also in contact with regulatory bodies worldwide.
Vesttoo provides insurers with access to so-called insurance-linked securities - an alternative form of reinsurance. These securities may be backed by collateral in the form of letters of credit.
If the securities turn out not to be valid, insurers will need to find replacement cover, or pay any insurance claims in full, industry sources say.
Reuters contributed to this report
