Tel Aviv court dismisses Vesttoo’s claim against co-founders & execs accused of fraud

The Tel Aviv District Court has dismissed insurtech Vesttoo’s initial attempt to claim damages from its two ousted co-founders and the persons that worked to source investors, who were implicated in the letter of credit (LOC) fraud scheme.

We reported back in September that Vesttoo filed a case with the Tel Aviv court to demand the return of 770 million Israeli New Shekels (approx US $201 million), from co-founders Bertele and Lifshitz.

The insurtech claimed that the compensation was due given the large scale fraud the co-founders are alleged to have been masterminded, that has now driven the company into the still ongoing bankruptcy process.

A further 247 million Israeli New Shekels (almost US $65 million) was also being demanded from Udi Ginati, Joshua Rurka and Tal Ezer, who were all named as Vesttoo staff involved in the sourcing of investors, including those behind the majority of the invalid letters of credit (LOCs).

The court ended up approving the foreclosure on approximately $30 million of assets linked to the ousted co-founders and the other persons accused of fraud.

But now, according to reports in the Israeli media, the Tel Aviv District Court judge has dismissed these claims in a hearing on Monday.

The reports state that the court has rejected Vesttoo’s attempt to claim NIS 770 million and as a result certain foreclosures against one of the co-founders Alon Lifshitz have been removed.

The judge said that with Vesttoo undergoing bankruptcy in the United States, its claim against the founders and other parties are not warranted under the court process it had initiated in Israel and should be attempted under a civil claim, it appears.

It is not typical for the company itself to start such proceedings, as these would usually come from an impartial trustee or a commissioner, the court decreed.

The judge said that the allegations against the co-founders and executives needs a thorough investigation, while also stating that Vesttoo filing the case while undergoing its bankruptcy could be considered a conflict of interest, reports state.

The court also said that, in the case of Lifshitz, Vesttoo had failed to present sufficient evidence, so ordered the removal of the foreclosure holding certain of his assets that was imposed at the start of the process.

Vesttoo said in a statement that this decision appears procedural and related to the type of proceeding it had filed, rather than whether it was right to file the claim against the executives.

Israeli tech publisher Calcalist explained that a statement from Vesttoo said, “The court ruled that since the lawsuit deals with the most serious acts of fraud and forgery committed by Yaniv Bartele, Alon Lifshitz, Udi Ginti, Josh Rourke and Tal Ezer around the world, the lawsuit should be settled in a normal civil procedure and not in a shortened and quick procedure taken by the company.”

So it seems a civil case could be the next step for the insurtech, if Vesttoo intends to continue pursuing its former executives for compensation.

At this stage of the Vesttoo saga and given the scope of the fraud that occurred, the fact no criminal charges appear to have been brought against any party accused of being involved in the fraud by now remains astonishing.

With so much value destroyed by the reinsurance letter of credit (LOC) fraud, there remains a great deal of uncertainty over where any proceeds actually went to and if/how any party involved benefited from the fraud that occurred.

It seems likely civil and criminal legal action must be initiated at some point, as all those damaged by the fraud look to recoup some of their exposure to it.

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