Fintech Vesttoo to Slash Jobs After Fake Collateral Scandal

Financial services company Vesttoo said on Tuesday it was laying off about 75% of its staff and closing some offices in Asia, as it tries to recover from a scandal over a fraudulent letter of credit used as collateral in a transaction with an insurer.

Israel-based Vesttoo, which uses artificial intelligence technology to connect the insurance industry and capital markets, said it would close its Tokyo, Hong Kong and Seoul offices, but would maintain staff in Tel Aviv, New York, London, Dubai and Bermuda. It had around 200 employees.

“In order to solidify the foundation of the company and reassure the industry, leadership must return its focus to core services while reducing overall costs, including parting ways with some of our employees,” Vesttoo said in an emailed statement to Reuters.

“These are painful, but important decisions that we must make at this time. Our focus remains on regaining our footing and emerging from this challenge stronger than before.”

Vesttoo – partly backed by Banco Santander’s fintech venture capital arm Mouro Capital – was in the process of raising around $200 million in a late-stage funding round that would value the firm at near $2 billion, but the company said it was currently not moving ahead with the fundraising.

Led by Mouro, Vesttoo last raised $80 million at a $1 billion value last October. At the time it said it would use the funds to further expand its global presence.

The company said it was conducting an internal and external analysis of the events leading up to the first report of a fraudulent letter of credit that was used in many transactions.

(Reporting by Steven Scheer; editing by Mark Potter)