Court documents show that global re/insurance broker Aon has secured a temporary restraining order to freeze the assets of under fire Vesttoo in the U.S. as the company pursues the insurtech via its segregated accounts and transformer structure, White Rock Insurance (SAC) Ltd.
Aon’s White Rock subsidiary offers reinsurance solutions via cell structures as transformers for its clients to access third-party capital through companies like Vesttoo.
The collateral is then held by White Rock in a specific cell at all times, with the financial obligations under the contract limited to the value of the assets in the segregated account.
The role of Vesttoo is to contract with investors for capital as collateral in the form of letters of credit (LOC) in order to secure the reinsurance obligations and to provide recovery in the event of default.
“But Vesttoo now admits that, unbeknownst to White Rock or Aon, an unknown number of the LOCs Vesttoo presented to White Rock and its clients were fraudulent. On information and belief, the fraudulent Vesttoo LOCs could total in the billions of dollars,” states a court document seen by Reinsurance News.
The documents reveal that, in light of the above, White Rock “seeks an injunction freezing the assets of Respondents Vesttoo Ltd. and its subsidiaries… pending arbitrations of White Rock’s claims against Vesttoo, stemming from an apparent large-scale fraud scheme surrounding letters of credit (“LOC”) provided by Vesttoo to collateralize reinsurance transactions facilitated by White Rock on behalf of its insurer clients.”
The document highlights that White Rock primarily acts as a middle man in these transactions, but with the aim of protecting its clients, is “exercising its contractual rights against Vesttoo to recover funds and obtain acceptable security for the benefit of its clients.”
The document also states that without immediate injunctive relief from this New York Court, “Vesttoo may empty its bank account prior to any adjudication in the forthcoming arbitrations, rendering ineffectual the anticipated relief in the arbitration.”
The document reveals that White Rock plans to file for arbitration against insurtech Vesttoo in Bermuda, but says that this would be pointless unless the assets are frozen in the U.S. to prevent their removal.
In response, the New York court has issued a temporary restraining order, under which Vesttoo is “Enjoined from transferring, withdrawing, assigning, alienating, selling, pledging, encumbering, concealing, hypothecating, or disposing any of its assets, including funds in Vesttoo’s bank accounts, held in bank accounts with Truist Bank, except for funds in the amount of $1,000,000, necessary to pay Vesttoo’s employees, taxes, and existing subcontractors and suppliers essential to Vesttoo’s ordinary course operations.”
The insurtech’s bank, Truist, has been ordered to freeze its accounts except for the $1 million noted above.
Additionally, Vesttoo has been ordered to respond to requests for discovery documents, while staff need to appear for deposition with White Rock’s counsel, with a court hearing to be held on August 15th where they can appeal.
