Vesttoo co-founders fired. Earlier 2019 fake letter of credit deal reported

Two of the co-founders of under-fire insurtech Vesttoo have now been fired by the Board, with CEO Yaniv Bertele and Chief Financial Engineer Alon Lifshitz now officially removed from the company, and a new allegation has been reported, that a 2019 transaction facilitated by Vesttoo also had a fake letter of credit (LOC).

Recall, the CEO and Chief Financial Engineer had been removed at the Board’s request and put on paid leave, as internal disagreements over how to handle the fall-out of the collateral fraud issues rose to the fore.

The Vesttoo Board then appointed Ami Barlev as interim Chief Executive Officer (CEO), while co-founder Bertele remained on paid leave at the time.

As we also reported just last week, during the Chapter 11 bankruptcy case Vesttoo was approved by the court to continue paying its staff, including certain employee benefits and expenses, but at a hearing last week the US Trustee balked at the suggestion terminated staff and founders may receive payments and so no exit payments are allowed to be made right now.

Now, Israeli publisher Calcalist has reported that the Vesttoo Board has sacked Bertele and Lifshitz after the conclusion of internal investigations and audits.

However, Vesttoo told us today that these are still ongoing, “The investigation is still ongoing and we will not comment further until it is concluded. We respect Yaniv and Alon’s privacy.”

But, more important news than the firing of the executives, Calcalist also reports that there was a reinsurance transaction facilitated by Vesttoo back in 2019 that also had a fake letter of credit (LOC).

Once again, Calcalist’s reporting suggests an inside line for its source, potentially to a board member at Vesttoo, as the publisher states, “Calcalist learned that the board’s allegations against the founders stemmed from the discovery of another problematic deal, amounting to millions of dollars, executed by Vesttoo in 2019, which relied on a fake line of credit from Citibank.”

The publisher also notes that as this alleged fake or fraudulent letter of credit (LOC) involves US bank Citibank, it could harm the ability of Vesttoo to be sold.

Previously, the allegations were all pointing to Chinese banks and branches located there being the ones involved in letter of credit (LOC) fraud, while Chinese investors were suspected to be the ones that should have furnished collateral for the transactions exposed.

In addition, the LOC fraud was only initially seen in transactions over the last year or so, with no allegations before these that there had been wrongdoing earlier in the history of Vesttoo.

If these latest allegations that Calcalist has written about are true, it suggests a more systemic fraud, running across a number of years, while Vesttoo was a far smaller entity at that time.

Once again, it also brings into question the KYC and collateral security check processes of the insurance and reinsurance industry.

In 2019, Vesttoo was a young company and so might have been expected to face more scrutiny, especially if the sourcing of collateral or investors was also being undertaken by a company that models risk and provides technology to facilitate collateralized reinsurance deals.

Numerous parties would have needed to sign off an LOC for a deal back in 2019 and you’d think an extra layer of scrutiny might have been applied, especially given Vesttoo’s potential involvement in sourcing capacity, as well as in modelling and structuring deals.

Calcalist also published a statement from the Vesttoo co-founders Bertele and Lifshitz.

It states, “Unfortunately, opportunistic parties exploited the temporary crisis the company was facing to advance aggressive and unilateral actions aimed at taking control of the company. In our view, the auditing body is in a significant conflict of interest, given the personal involvement of those who appointed it in the events being audited. This investigative body singled out the founders from the outset. Despite an extensive investigation, no evidence has been found against them, let alone presented.

“Consequently, in the absence of any substantial findings, baseless and deceitful allegations against the founders began to be leaked to the media in an attempt to tarnish their reputation, without affording them a basic opportunity to address these claims. It’s crucial to note that such leaks significantly undermine the company’s business endeavors, including with established and reputable entities that have faith in the company and seek to support its growth. Needless to say, the founders retain all their claims and rights in this matter.”

The mystery deepens with the news of the earlier fraudulent or fake LOC deal, but it does seem that we could be nearing greater clarity over what has happened, as the Board will need to disclose what it has learned from the investigation to the bankruptcy court at some stage and for that court action to be meaningful, transparency over who was behind the fraud will be critical.

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