Creditors in the Vesttoo bankruptcy case objected to insurtech’s reorganization

The Official Committee of Unsecured Creditors in the Vesttoo bankruptcy case has voiced its objection to the insurtech startup’s plans to reorganize the company and return to activity following the letter of credit (LOC) fraud scandal.

According to the report, this misconduct was shielded from the majority of Vesttoo’s employees, the Board of Directors and the insurance markets.

“Among the critical findings from the investigation are that a number of former Vesttoo executives, namely Yaniv Bertele, Alon Lifshitz, Udi Ginati and Josh Rurka were directly involved in creating fake documents and forging identities,” read the report prepared by financial and risk advisory firm Kroll.

In September, the Tel Aviv District Court has approved to seize NIS 117 million (approximately $30 million) from two of the founders of Vesttoo, two former executives at the company, and a service provider.

The approved request, submitted by lawyers Shmulik Cassuto and Ronan Buch, included foreclosures totaling approximately NIS 90 million ($23 million) on the assets of co-founders Yaniv Bertele and Alon Lifshitz. In addition, the court imposed foreclosures totaling NIS 27.6 million ($7.2 million) on the two former employees and the service provider.

These unilateral foreclosures were the result of Vesttoo’s request to seize NIS 768.6 million ($201 million) from Bertele, who served as the company’s CEO, and Lifshitz, who served as Chief Financial Engineer. In addition, the court was asked to seize NIS 247 million ($65 million) from Udi Ginati and Josh Rurka, two former executives at the company, and Tal Ezer, who provided services to the company.

Creditors in the Vesttoo bankruptcy case objected to insurtech’s reorganization

Vesttoo – viewed as the Madoff of insurance – never operated as a business or as a going concern without revenue from the fraud

the Committee wrote in an official filing

“Like Bernie Madoff among investors, the trust Vesttoo once had with cedents evaporated upon the revelation of the fraud that Vesttoo’s former CEO, CFE, Senior Director of Capital Markets, and others perpetrated on insurance companies, and that trust will never be recovered. No reputable insurance company can afford the risk of doing business again with Vesttoo, regardless of the company’s new brand name.”

The board of Vesttoo filed its first interim report in the United States Bankruptcy Court for the District of Delaware and said that its investigation identified that “pervasive and systemic misconduct” was engaged in by a limited set of Vesttoo executives and other third-parties outside of Vesttoo.

Vesttoo filed its first interim report in the United States Bankruptcy Court
Vesttoo Files First Interim Report With Bankruptcy Court

The creditors’ committee insisted that any attempt to rebrand would be a waste of money that could be recovered by its creditors.

“The Committee files this Motion to stop the Debtors from continuing their wasteful pursuit of a dead-on-arrival reorganization or going concern “Trade Forward” strategy that has depleted the Debtors’ available cash rapidly to a shocking degree,” the filing states.

Ami Barlev, Vesttoo’s interim CEO commented that “despite the Committee’s sensationalist accusations which do nothing but destroy value, we have no doubt that the creditors’ committee is not trying to maximize any value for the creditors, and in fact is performing actions that constitute complete value destruction.

Ami Barlev, Vesttoo’s interim CEO

The Committee has not even attempted to understand the Company’s business plan, nor are they willing to provide the Company with the limited time needed to deliver a value-maximizing transaction.

We have no doubt that Vesttoo’s underlying technology, infrastructure, and talent base continue to have significant embedded value that can be recapitalized to the benefit of Vesttoo’s creditors, with minimal incremental investment.

Vesttoo explained in its response that under the United States Bankruptcy Code, the company was awarded the exclusive right to file a plan of reorganization for a minimum of 120 days.

The company also noted that the Committee wants to terminate all of its employees, “the majority of whom are currently in Israel under unthinkable conditions and many of whom are currently serving in the conflict in Gaza, and at a time when many employees in the market are in great mourning in light of the murderous terrorist attack, in which hundreds of innocent people were murdered, many of them children.

“Despite this, in a short amount of time, and under impossible circumstances the Company has managed to produce a significant business plan and received positive indications from third parties for external investment in the aforementioned plan, and also received an independent opinion that indicates a significant value to the Company’s technology.

Vesttoo expects to file a response to the Committee’s motion and expects the Bankruptcy Court to rule in November. The Committee’s filings do not impact Vesttoo’s management and operation of its business under the direction of its Board of Directors

Vesttoo’s statement concluded

Vesttoo explains that with the protection this offers, its platform and current capital structure remain both stable and fully sustainable.

The insurtech goes on to note that despite these proceedings, its Board of Directors does not plan to liquidate the company, but intends to emerge from it a stronger partner in the years ahead.

Insurtech believes that this will enable it to develop its business plan moving forward under its Board of Directors, while providing Vesttoo with protection from its creditors, strengthen its business and facilitate its restructuring plan, all while maintaining normal business operations.

The company feels that following allegations that fraudulent LOCs were used on its platform, 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.

Vesttoo has requested that the New York court deny Aon’s White Rock Insurance request for a preliminary injunction to freeze its assets, stating that this would ultimately destroy its business by ending its ability to operate.

According to Beinsure Media, Markel Bermuda has appointed to the statutory committee of unsecured creditors in the U.S. Chapter 11 bankruptcy of InsurTech Vesttoo.

In the pair of transactions, MBL ceded collateral protection insurance risk to the segregated account, which in turn was required to provide reinsurance collateral to MBL.

The letters of credit, one for $50 mn and another for $77.75 mn, were provided as collateral backstops in the event claims were made and not paid on the underlying policies for these transactions.

Both letters list an affiliate of Vesttoo as the applicant on behalf of White Rock, with MBL as the designated beneficiary.

Peter Sonner   by Peter Sonner