An Israeli tech publication has reported that insurtech Vesttoo is under investigation following the discovery of billions of dollars in “fraudulent collateral”, with the fall-out prompting the departure of some of the leadership team.
As first reported in publisher Calcalist’s CTech yesterday, it’s understood that “billions of dollars in collateral” are involved.
The same publication reported that an initial investigation is underway concerning what it describes as “fraudulent collateral”, claiming that “the collateral claimed by the company was found to be virtually nonexistent.”
Artemis, our insurance-linked securities (ILS) focused sister publication, reached out to Vesttoo for comment and the insurtech confirmed that an investigation had commenced.
“The Vesttoo team discovered inconsistencies between an investor and a cedent in transactions that Vesttoo modeled the risk for,” explained Vesttoo to Artemis. “We take the integrity of our business very seriously and are conducting a comprehensive third-party audit to ensure our due diligence processes continue to be robust.”
The Tel-Aviv headquartered insurtech completed a Series A funding round back in August 2021, followed by a Series B round in November of the same year, and a Series C round in October 2022, which the company said raised its valuation to $1 billion.
The insurtech is non-catastrophe, casualty focused, and does things differently, with private deals and we understand letters of credit (LOCs) for collateral, when compared to more typical catastrophe bonds and 144a transactions.
In ILS, transactions are largely fully-collateralised or at least mostly-collateralised minus the upfront payments or any benefits of leverage. Any miss-match or inconsistency is a real issue as it brings the integrity of the deal into question.
LOCs are provided by a bank and the investors in these types of transactions will interface with that bank, so if this were the case with the Vesttoo transaction(s) being investigated, then the bank process involved could also be subject to scrutiny.
Currently, there’s limited information and so it’s difficult to know what has actually occurred. A little more information was provided by Israeli newspaper Globes, which reported that the Board of Vesttoo started the alleged fraud investigation, adding that there’s suspicion “guarantee documents presented in order to get deals done were forged.”
Vesttoo has also confirmed that following the launch of this initial investigation, some of the leadership team has already left the company.
“A few members of the leadership team have decided not to wait for the results of the audit and have decided to leave, and we respect their decision,” said the insurtech.
