Vesttoo: Asset freeze would be “catastrophic” for company

In court documents filed to petition against the freezing of its assets, insurtech Vesttoo has said the move would be catastrophic for the company, with its interim CEO saying it would “destroy” Vesttoo’s business.

The insurtech also claims that Aon’s White Rock SAC is not entitled to an injunction against Vesttoo, as it has failed to show evidence that “Vesttoo is dissipating or concealing assets.”

There is a New York court hearing today regarding the case and Vesttoo is fighting to ward off the freezing of its funds, which could render the business inoperable.

Recall that Aon’s White Rock SAC secured a temporary restraining order in a New York court to freeze the insurtech’s funds last week.

Aon then expanded its attempt to freeze the assets of beleaguered insurtech Vesttoo, with a fresh appeal to freeze its assets via a court in Tel Aviv made by its White Rock Insurance (SAC) Ltd. company.

In response, Vesttoo filed for Chapter 11 bankruptcy protection, seeking “breathing room” to allow it the time to pursue legal action against those it feels are responsible for the crisis it faces.

Now, court documents filed in relation to the New York hearing show the company’s new interim CEO Ami Barlev saying, in a declaration, “Vesttoo’s weekly expenses are approximately $360,000. Limiting Vesttoo’s access to $1,000,000 from its global accounts, if that is the relief sought by Petitioner, is insufficient for Vesttoo’s continued operations and would be catastrophic for the Company. Vesttoo’s ongoing efforts to sustain the viable operations of its business are already being hindered by the order that appears to restrain Vesttoo’s ability to access all of its assets.

“Should this Court grant the Petition and encumber all of Vesttoo’s assets, the Company would be forced to cease virtually all operations.”

The declaration continues, “Vesttoo has no intention to transfer any funds from its global accounts outside of the ordinary course of customary and necessary expenses for the Company’s operations.

“All decisions regarding material Company expenditures will be made with the approval of new leadership.

“Vesttoo has no current intention of transferring assets from the United States to its foreign accounts except for those necessary to pay business expenses in the ordinary course.”

In additional court documents filed in opposition to the move by Aon’s White Rock to secure an injunction against Vesttoo prior to arbitration, the insurtech states, “White Rock seeks, based on mere conjecture and speculation, extraordinary preliminary injunctive relief to freeze essentially all of Vesttoo’s assets to protect a theoretical arbitral award. Such relief, if compelled, hamstrings Vesttoo and destroys its business by ending its ability to operate.”

Adding, “White Rock has not met its high burden of showing that it will suffer irreparable harm absent the injunction, the balance of equities weighs overwhelmingly in Vesttoo’s favor.”

The filing goes on to state, “In order to satisfy the irreparable harm element when seeking an injunction to freeze a company’s assets, the movant must provide evidence that the non-movant is dissipating assets, or is likely to dissipate assets given its past and current conduct. White Rock has failed to provide any evidence of such activities.”

Also saying that, “The alleged past wrongdoing was not concealing or dissipating funds, and there is no support for the allegation that current management will conceal or dissipate funds.”

Numerous case law examples are given in the documents that the insurtech says support its case, but the crux of Vesttoo’s argument is that Aon’s White Rock has not provided evidence it has caused irreparable harm, or breached its contracts, or even engaged in fraud.

So, as you would expect, Vesttoo is claiming it has done no wrong and so states that the Aon White Rock injunction and pursuit of arbitration is unwarranted.

However, Vesttoo has still not given any specific evidence that helps to prove the contrary, or explained how allegedly invalid letters of credit (LOCs) came to be used as collateral. Nor has the insurtech delivered the findings of its own and third-parties audits or investigations into the matter so far.

Which, at this stage, means it will be up to the courts, perhaps even their interpretation of case law, to decide the next steps here.

When really what is needed for the market to move forwards on this issue that has widespread ramifications, as we said earlier today, is transparency and information as to which actor or actors in the chain of trust, linked to the affected collateralized reinsurance transactions’ collateral, is/are actually to blame.

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