Under-fire Israeli insurtech Vesttoo, which is at the heart of a letter of credit (LOC) fraud scandal, is now claiming hundreds of millions of dollars back from its two ousted co-founders, as well as persons that worked to source investors, that also have been named as accomplices in the fraud scheme.
Vesttoo co-founders Yaniv Bertele and Alon Lifshitz were removed from the company when the allegations of an extensive letter of credit (LOC) fraud scheme affecting the collateral, that should have backed up reinsurance deals, emerged.
The pair were then named as being complicit in the fraud, as well as executives connected to the network that found capital for the company, in a report on the audit.
While Vesttoo’s bankruptcy case is ongoing, as too are efforts to subject the insurtech to legal discovery and an investigation in Bermuda, the company is also now pursuing financial compensation from those that have so far been identified as behind the fraud that has occurred.
As a result, Vesttoo has filed with the Tel Aviv District Court, requesting the return of a significant sum of money from the ousted co-founders and those identified as complicit to the fraud within its capital and investment sourcing operation and network.
Vesttoo is demanding the return of 770 million Israeli New Shekels, which is roughly US $201 million, from the ousted co-founders Bertele and Lifshitz, saying that the compensation is demanded given the large scale fraud they are alleged to have been involved in and that has now driven the company to bankruptcy.
In addition, a further 247 million Israeli New Shekels (almost US $65 million) is demanded from Udi Ginati, Joshua Rurka and Tal Ezer, who were all named as involved in the sourcing of investors, including those behind the majority of the letters of credit (LOCs) that have now been found to be fraudulent, or invalid.
Vesttoo also claims that some US $7.2 million was handed to Ginati, Rurka and Ezer as commissions for sourcing the letters of credit (LOCs) from the investors involved, according to media reports in Israel.
Israeli media also reports that Bertele and Lifshitz may have sold some of their shares in the company just prior to the fraud breaking in the news, while an extravagant spending on private jets and other items.
It now transpires that some US $57 million had been delivered by Vesttoo to the Hong Kong based investor at the heart of the scandal, Yu Po Holdings.
How much of that has been siphoned off via the fraud and who actually benefited, remains to be seen, but we are hearing from sources in Hong Kong that Yu Po is assumed to be a shell company, used as a front for fraudulent activity, which would suggest the majority of those funds will have been taken by those behind the letter of credit (LOC) scheme.
We understand there is an ongoing corruption investigation into Yu Po and the bank connections involved as well, in Hong Kong at least and perhaps extending into China.
Israeli media also references the very first transaction Vesttoo ever entered into, claiming that Citibank documents were forged in that case, a further suggestion that the scheme ran back a long way into the companies history.
We had previously reported on a reinsurance arrangement from 2019 involving Citi documentation.
There are also claims in the Israeli media that, as revealed in the Tel Aviv court filings, apparently some Vesttoo employees were aware of the fraud since earlier this year and had become suspicious that there was a potential issue related to the investors and funding Vesttoo was using for its reinsurance deals.
The Israeli media sources report that Bertele and Lifshitz took certain employees to Hong Kong in order to meet persons supposed to be from the bank involved and the investor Yu Po Holdings, but that this was all said to be part of the scam as well, according to the Tel Aviv court filing.
The fact internal persons may have had specific concerns over the sources of capital that Vesttoo was using for its reinsurance deals has been raised before, but it does raise questions over why the fraud took its time to come out and only then when a ceding company tried to access funds from a letter of credit.
With court action ongoing in three countries at least currently, it is a surprise we’ve not see any attempts to file criminal charges at this stage, with this seeming to be a more corporate attempt to recover financial assets from those deemed involved with, perhaps behind the fraud.
Criminal action has to follow though and the questions over who knew what may get louder as well, as more information emerges.