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Vesttoo Ltd. and its subsidiaries (Vesttoo), which have been the subject of assertions related to the alleged issuance of fraudulent letters of credit (LOCs) in connection with its services focused on supporting reinsurance transactions through various entities, has released the content of its First Interim Report filed in the US Bankruptcy Court for the District of Delaware, on 7 September 2023.
The report details from an investigation, initiated by Vesttoo in July 2023 and said to be ongoing, that “forensic and documentary evidence has confirmed that a conspiracy to perpetuate a fraudulent scheme relating to the LOCs existed.” The report names five individuals who were employees of Vesttoo as alleged participants in the conspiracy, including former CEO Yaniv Bertele and former CFE Alon Lifshitz. The report also contends that individuals associated with Vesttoo’s largest investor in Vesttoo transactions, Hong Kong-based company Yu Po Holdings Ltd. (Yu Po), and China Construction Bank (CCB), and Standard Chartered Bank (SCB), were involved in the conspiracy.
Among its key findings, the report claims that evidence suggests that “[i]n multiple instances Bertele and Lifshitz were directly involved in personally creating fraudulent documents (including Proof of Funds statements and LOCs) that on their face appear to be coming from two banks” and “instances where Bertele used multiple constituent parts (e.g., a Word version of a draft LOC, a bank’s letterhead and logo, and a purported signature of a bank executive) to cobble together a single Word document that was converted to PDF apparently showing a final LOC, on bank letterhead and signed by a bank officer, which document is then sent by Lifshitz to the counterparty.”
Key findings outlined further maintain that in spite of “numerous and very serious red flags” raised as early as June 2022 about Yu Po regarding evidence of how the CCB LOCs were issued, no significant action was taken. The report also avers that “circumstantial evidence includes the fact that three separate banks (CCB, Standard Chartered and Santander) were used for forged and fraudulent LOCs and, remarkably, essentially all except one of the LOCs from three separate banks, to the tune of billions of dollars of collateral, appear to have been fraudulent.”
The report contends that since 2020, Vesttoo closed 65 transactions which led to standby LOCs “issued” by CCB (USD 2.81 billion); SCB (USD 362.5 million); and Santander Bank (USD 186 million). “Of these LOCs, the banks have confirmed that the vast majority of the LOCs are fraudulent”, according to the report. Different tactics said to have been used to create and perpetuate the fraudulent scheme were described.
The 27-page report goes on to steps to pursue wrongdoing, re-establish governance and institutional controls, managing the runoff of existing business, and developing a restructuring plan. As noted within the interim report, supplemental reports are expected as the case processes.