Vesttoo Case: White Rock Notes 37 LOCs in Question, Representing $2.35B

A new filing in the Vesttoo bankruptcy case provides a more detailed view of the scale of the alleged fraud.

Source: Artemis | Published on August 31, 2023

Porch sues Chinese bank over reinsurance fraud

A new filing in the Vesttoo bankruptcy case provides a more detailed view of the scale of the alleged fraud, as Aon’s segregated accounts and reinsurance transformer company White Rock Insurance (SAC) Ltd. notes that there were 37 letters of credit (LOCs) that were likely invalid, which represented some $2.35 billion in value.

Aon’s White Rock Insurance (SAC) Ltd. has filed its opposition to Vesttoo’s bankruptcy case motion to enforce an automatic stay against the legal action being taken against it.

Recall that a proposed automatic stay order appeared to have been agreed, after Vesttoo’s lawyers engaged with the counsel for Aon’s White Rock Insurance (SAC) Ltd. and the Joint Provisional Liquidators for the White Rock cells that are subject to Bermuda court action.

But, White Rock has now filed its opposition to this motion for an order enforcing the automatic stay, saying that it has not violated any stay so far and that its imposition should be denied by the bankruptcy court as it should not affect the Bermuda Supreme Court action.

If the automatic stay motion is denied, it could allow the court action in Bermuda to continue unhindered, as regulator the Bermuda Monetary Authority (BMA), alongside the joint provisional liquidators that have been appointed and Aon’s White Rock could continue their case to liquidate the segregated cells that had held Vesttoo-linked reinsurance deals.

So that should play out in the bankruptcy court over the coming days.

More revealing though, is the fact White Rock provides some clarity over the scale of the issue for the first time, saying that potentially 37 letters of credit (LOCs) are involved, which it appears all of were found to be invalid.

“In total, Vesttoo LPs represented that they obtained 37 letters of credit to serve as collateral for White Rock’s reinsurance contracts,” the opposition filing states.

Adding that these letters of credit came from banks which had already been named in the proceedings, China Construction Bank Corp. (CCB), Banco Santander, S.A., and Standard Chartered Bank USA.

The opposition filing continues to state that, “The banks listed above have indicated that the letters of credit that Vesttoo had represented collateralized reinsurance contracts had actually been invalidly executed.”

It then explains about the cedent that had tried to draw on a CCB letter of credit only to be told it “was not issued by CCB and appeared to be fraudulent.”

After which the White Rock opposition filing states, “It now appears that up $2.35 billion of letters of credit that Vesttoo purported to procure that collateralized the Vesttoo Cells were invalid.”

Which provides the first factual information regarding the scale of this issue and alleged fraud.

Remember that Aon, via its White Rock SAC vehicle, was pursuing Vesttoo for reparations, after letters of credit (LOCs) backing collateralized reinsurance deals were alleged to be fraudulent or forged, with the broker seeking a $136.7 million return of funds from impacted cells.

That figure seems likely to reflect the premium sums involved, while the $2.35 billion is more likely the collateralization limit that was supposed to have been put in place, but is now seen as invalid.