Vesttoo seeks “breathing room”, files for Chapter 11 bankruptcy protection

Beleaguered insurtech Vesttoo has filed for Chapter 11 bankruptcy protection in the United States, as the company seeks “breathing room” to allow it the time to pursue legal action against those it feels are responsible for the crisis it faces, while also likely seeking protection against the legal action it faces from others such as broker Aon.

Vesttoo said that the company and its subsidiaries commenced Chapter 11 proceedings in the United States Court for the District of Delaware yesterday.

The company faces a New York court appearance today in relation to the lawsuit and temporary restraining order on its assets filed by Aon’s White Rock SAC transformer structure.

This move for Chapter 11 bankruptcy protection could help Vesttoo ward off some legal claims against it and also protect its remaining assets, while allowing it to focus on continuing to investigate the fraud that has evidently, by this stage, occurred and those responsible for it.

As a reminder, Vesttoo has stated that it believes that those responsible sit outside the company now, blaming external factors including foreign banks and financial institutions. It’s not clear if any departed former employees are implicated as “external”.

The company explained, “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.

“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.”

Interim CEO 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.”

The company said that it, “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.”

While the legal wrangling continues and this move for bankruptcy protection appears an attempt to protect itself and its assets from the court action it faces, this saga is now at the stage where Vesttoo must provide more insight and clarity into what exactly it has learned about the fraud that is alleged to have occurred.

The company has said it has completed an investigation, while as we had previously reported Kroll had been investigating as a third-party as well.

While Vesttoo has concluded the blame lies externally, it has stopped short of saying where it believes any of this blame lies.

The market is awash with rumours as a result, mostly surrounding questions over who the investor(s) backing reinsurance deals with invalid letters of credit (LOCs) were and who the capital introducers were that brought them into an arrangement.

The continued lack of clarity surrounding what has occurred is likely to be harmful to any reputation that Vesttoo hopes to salvage from this episode.

At the same time, it appears significant sums of capital are missing or have been moved out of reach of those they were supposed to benefit. See the Aon lawsuit and its attempts to recover almost $137 million of collateral that got swapped out of a White Rock cell and replaced with letters of credit (LOCs) that a bank said were invalid.

Which means someone is lacking that collateral in their reinsurance arrangement and at this time there’s still no clarity as to where it has gone, clarity which perhaps Vesttoo could provide, if it does indeed have information as to where any blame lies.

Someone needs to start pointing the finger more directly, if indeed they have any concrete information that might suggest which actor or actors in the chain of trust around the affected collateralized reinsurance transaction collateral is actually to blame.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.