The Vesttoo Creditors Liquidating Trust, established by the U.S. Bankruptcy Court in Delaware, has filed a lawsuit targeting Aon, China Construction Bank (CCB), and associated individuals and entities for their alleged role in a scheme that triggered the collapse of Vesttoo and caused widespread disruption across the insurance sector.
Vesttoo, once a prominent Israeli insurtech, filed for bankruptcy in 2023 following revelations that more than $4bn in letters of credit (LOCs) backing reinsurance deals were fraudulent.
The fallout has since sparked multiple legal actions, including Aon’s separate litigation against CCB. Vesttoo has filed for Chapter 11 bankruptcy protection in the U.S., as it looks to protect its assets and aggressively pursue legal action against all parties responsible for the fraudulent letter of credit (LOC) saga.
The new complaint alleges Aon knowingly promoted and sold its Collateral Protection Insurance (CPI) product to Vesttoo and other counterparties based on what the Trust calls “blatantly false” claims.
According to the filing, Aon presented the CPI product as a novel solution providing accurate intellectual property valuations, while internally recognizing it was flawed and carried undisclosed risks.
The Trust further accuses Aon of ignoring internal warnings and red flags pointing to forged LOCs created by a small group of co-conspirators, which led Vesttoo to rely on collateral that never existed.
These actions, the complaint claims, allowed Aon to rapidly expand its CPI product, collect millions in fees, and funnel high-risk transactions toward Vesttoo without proper due diligence.
Before adopting Aon’s CPI structure, Vesttoo’s counterparties had never drawn on its LOCs. The lawsuit argues that Aon’s conduct directly led to Vesttoo’s reliance on misvalued assets and ultimately its financial collapse, which also destabilized confidence across the reinsurance market.
The complaint also seeks damages from CCB and several individuals allegedly involved in the LOC fabrication scheme. Over $2.8bn worth of LOCs tied to Vesttoo transactions were determined to be forgeries.
Lawrence Hirsh, Liquidating Trustee, stated that Vesttoo’s failure was a direct result of misconduct by Aon and CCB. He claimed Aon misrepresented the CPI product as a trusted standard and knowingly steered risky transactions toward Vesttoo despite serious flaws and obvious warning signs about its collateral sources.
Hirsh emphasized that this lawsuit marks the beginning of efforts to recover funds and hold responsible parties accountable.
Vesttoo’s collapse was the direct result of Aon and CCB’s fraudulent conduct. Aon knew there were serious flaws in its CPI product, yet continued to falsely market it as the gold standard in intellectual property valuation.
Lawrence Hirsh, Liquidating Trustee
Aon, in response, dismissed the lawsuit as a distortion of facts and claimed Vesttoo’s estate is attempting to shift blame for its own deliberate fraud.
The company said Vesttoo’s internal investigation already acknowledged that its executives and collaborators were behind the fraud and that Aon was one of the primary victims.
Aon also steered its riskiest transactions to Vesttoo while ignoring glaring red flags regarding Vesttoo’s collateral providers, reaping tens of millions in fees while enabling a scheme that destabilised the global insurance market.
“Absent Aon’s false representations about its CPI product, Aon’s failure to satisfy its due diligence obligations to Vesttoo and its counterparties, and CCB’s facilitation of billions in forged letters of credit, Vesttoo’s business would not have relied on the misvalued deals and forged collateral that led to its demise,” Lawrence Hirsh commented.
Meanwhile, the Trust has also filed additional legal actions targeting other service providers involved in Vesttoo-linked deals, aiming to reclaim funds distributed before the company’s collapse.
Vesttoo investigation reveals $4 bn fraud involving fake letters of credit. The allegedly fake letters of credit (LOCs) provided by investors to insurers for reinsurance transactions on the Vesttoo platform are believed to total a sum of around $4 bn, Calcalist has learned.
The fraud came to light when one of the LOCs was found to be fake, leading to a comprehensive review of all letters of credit issued by the company.
Most of the letters, allegedly forged, were from a leading Chinese bank, which appears to have been unaware of the situation. Vesttoo claims it cannot comment on the extent of the alleged fraud since the matter is still under investigation.
The idea behind the company’s insurance-linked securities (ILS) platform is to connect insurance companies with institutional investors in the capital market who are interested in acting as reinsurers, in exchange for payment for the risk they will assume.
This is an old model in the insurance world, under which the insurer sells part of its obligations to a body with deep pockets, and both share the costs of paying the insured in the event of an insurance event.
The old model was adapted to the technological age, and the platforms that were developed – such as Vesttoo’s – have become part of the insurtech sector.
The suspicion surrounding Vesttoo is that investors using the platform were able to purchase insurance risk from insurance companies by presenting fake collateral that Vesttoo’s system did not detect.
These alleged forgeries may have involved cooperation with employees of various banks, primarily in China. Vesttoo, which may have benefited from commissions on these transactions that are estimated to have reached billions of dollars, also suspects that some of its executives were aware of the possibility to complete these transactions through the platform with fake LOCs.
