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Vesttoo may be Bermuda’s ‘largest insurance fraud’ ever

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Judge Mary F. Walrath, United States Bankruptcy Court for the District of Delaware (File photograph)

Vesttoo Bermuda’s joint provisional liquidators have slammed the bankrupt insurtech, saying that the parent company is absurdly claiming victim status and inexplicably keeping some of its leadership in place — despite those executives and directors having overseen what is, by their own admission, a massive fraud.

“First, Vesttoo’s self-portrayal as the victim here is unjustified,” wrote Charles Thresh and Michael Morrison, joint provisional liquidators of Vesttoo P&C, the company’s Bermuda entity, in a filing in Delaware.

“Second, Vesttoo’s self-portrayal as the potential saviour here is nonsense,” they added.

Vesttoo is seeking to get the Bermuda liquidators held in contempt for recovery efforts related to White Rock Insurance (SAC) cells.

The case is being heard in the United States Bankruptcy Court for the District of Delaware, with Judge Mary Walrath presiding.

The insurtech is claiming ownership of the cells and argues that the cells are protected in the bankruptcy proceedings.

The liquidators counter that a stay order under the bankruptcy does not apply to their work related to the White Rock cells.

They contend in the filing that Vesttoo has no control over the assets of the cells, that the authority belongs to White Rock and to the liquidators to the extent that they are working on behalf of the board of White Rock. Vesttoo, they say, only has a right to the surplus, if any, from the cells.

The liquidators add that rather than being in conflict with the Delaware court, what they are doing is very much in line with the proceedings.

In the document, the liquidators go on to cast doubt on the credibility of the current management and question its ability to effectively lead the company through bankruptcy.

“Vesttoo has admitted it perpetrated what is likely the largest fraud ever in the Bermuda (re)insurance market through ‘pervasive and systematic misconduct’ as part of a conspiracy among multiple Vesttoo senior officers and directors and others,” the filing said.

“Despite the pervasive fraud at Vesttoo, no trustee or independent crisis manager has been installed to oversee Vesttoo. Instead, many of Vesttoo’s pre-bankruptcy senior officers and directors remain in place.

“Yet Vesttoo admits that for years there was a massive ongoing fraud and multiple ‘red flags’ right in front of those officers and directors that they somehow perceived as ‘business as usual’.”

Vesttoo was founded in 2018 and registered a collateralised insurer in Bermuda in 2022. It was to be the eBay of reinsurance.

Co-provisional liquidator: Charles Thresh, of Teneo in Bermuda (Photograph supplied)

The insurtech platform started falling apart this year when it was found that collateral used in some transactions appeared to have been fraudulent.

In early August, Vesttoo Alpha P&C was placed into liquidation by the Bermuda Monetary Authority, and Mr Thresh and Mr Morrison of Teneo were appointed to be joint provisional liquidators.

Later in the month, dozens of Vesttoo-related companies filed for bankruptcy protection in Delaware, and on August 20, the Bermuda Monetary Authority said that together with White Rock Insurance (SAC), it would focus on pursuing maximum recovery in the courts in Bermuda.

Last week, in another filing dated September 14, the Official Committee of Unsecured Creditors asked the court to allow it to begin discovery in the case against Vesttoo.

The document catalogues a litany of concerns about the company – referred to as the debtors – and its current management.

“The committee is deeply concerned that, given the debtors’ current board and management, the debtors have conflicts of interest that preclude them from investigating credibly the full extent of the apparent wrongdoing and any failures to detect the same” the committee alleges in the document.

“Accordingly, the committee seeks to conduct Rule 2004 discovery to analyse independently what misconduct occurred, why it took so long to detect it and what claims and causes of action the debtors may have as a result.”

It argues that the company’s investigation was rushed, declared over far too soon and was incomplete.

The committee speculates that this may have been due to incentives to finish the investigation as soon as possible.

The committee notes that present directors and management have not been held accountable in any way, although they “likely failed to fulfil their fiduciary duties, implement and enforce appropriate controls and detect the fraudulent conduct.”

In the discovery, the committee is asking for hundreds of documents related to the structure of Vesttoo, the company’s assets and liabilities, records of contractors paid, and correspondences related to the firing of senior officers, including Yaniv Bertele, cofounder and chief executive, Ben Zickel, cofounder and Alon Lifshitz, cofounder and chief financial engineer.

It also wants correspondences related to the appointment of Ami Barlev as interim CEO and documents that can help identify “fictitious personas created or used by any participant in the conspiracy.”

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Published September 18, 2023 at 8:00 am (Updated September 19, 2023 at 8:13 am)

Vesttoo may be Bermuda’s ‘largest insurance fraud’ ever

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