Vesttoo Creditors Say Bankrupt Israeli Insurance Startup Should Liquidate
Vesttoo Ltd. creditors are seeking to take control of the bankrupt Israeli startup’s court proceedings, arguing the company should liquidate following revelations that its former executives helped create fraudulent documents that supported transactions on its platform.
A committee of Vesttoo creditors said the company is “viewed as the Madoff of insurance” and that its remaining cash should be preserved so it can pursue potential litigation against former corporate insiders and other parties involved in the alleged fraud, according to a court filing Sunday.
In response, Vesttoo said Monday that the committee is disrupting its restructuring efforts and that the business has valuable technology and a viable business plan that it will pursue in Chapter 11. The company’s lawyers said in a letter earlier this month that the “entire business was not a fraud or conducted at a total loss” and that the startup developed valuable algorithms, applications and data systems which could be sold to a third party.
The committee is composed of insurance companies and an insurance underwriter according to court documents. It believes Vesttoo’s brand can’t be rehabilitated and that its business plan is futile. Instead, the committee said any sale of Vesttoo assets is “limited, at best” and that potential litigation claims are the only meaningful assets Vesttoo has left to compensate creditors.
Vesttoo said in said in September that it uncovered evidence that the company’s former chief executive officer and chief financial officer were involved in creating false documents and that letters of credit “that were the foundation of Vesttoo’s business were largely illusory.”
The company, which filed for bankruptcy in August, has said most company employees, its board of directors and the insurance markets were shielded from the misconduct. Vesttoo’s former executives, meanwhile, are contesting their dismissals under Israeli law, the company has said.
Vesttoo said Monday the committee wants the company to terminate all its employees “the majority of whom are currently in Israel under unthinkable conditions and many of whom are currently serving in the conflict in Gaza.”
Judge Mary Walrath will consider the committee’s request to take control of the Chapter 11 on Nov. 8.