Insurance broker Aon Plc was accused in a civil lawsuit of helping cause the collapse of Vesttoo Ltd., an Israeli insurance startup once valued at $1 billion that went bankrupt after disclosing certain documents underpinning its business were falsified.
A trustee responsible for recovering money for creditors of Vesttoo, which filed Chapter 11 in 2023 and subsequently liquidated, is suing Aon, according to a complaint unsealed Wednesday in Delaware bankruptcy court.
The lawsuit claims Aon “ignored red flags” about letters of credit and encouraged counterparties to work with Vesttoo despite expressing concerns internally about the business. The trustee, Lawrence Hirsh, alleges the insurance broker partnered with Vesttoo in an effort to scale an Aon insurance product designed to reduce the risk associated with lending to startups.
Aon said in a statement Thursday that the lawsuit is “a perverse attempt by Vesttoo’s bankruptcy estate to shift responsibility for Vesttoo’s deliberate fraud to Aon, one of the fraud’s biggest victims.” The Financial Times reported on the lawsuit earlier.
“Vesttoo has already acknowledged in its own investigative report that executives of the company, along with other co-conspirators, were responsible for the fraud and intentionally sought to mislead Aon and other impacted parties,” a spokesperson for Aon said. “We will vigorously defend Aon against these meritless claims and continue to take steps to both maximize recoveries for our clients and strengthen standards across our industry.”
The product — Collateral Protection Insurance — would provide insurance to lenders in the event that a liquidation of a borrower’s assets would not produce enough to repay debt. CPI was intended for companies such as startups with mostly intellectual property assets, and a service that required accurately valuing the IP, according to the complaint.
CPI also required reinsurers that “would bear the ultimate insurance risk” on the deal, the complaint said. For its riskiest transactions, the lawsuit alleges Aon “relied heavily” on Vesttoo’s ability to find reinsurance capacity through its capital market investors.
Vesttoo was well-funded but “led by an inexperienced team eager to work with a blue-chip company like Aon,” the trustee said in the complaint.
The lawsuit also names other parties including China Construction Bank Corp., whose former employee has been accused of working with Vesttoo insiders to create fake letters of credit used by the platform.
Vesttoo filed Chapter 11 soon after Aon subsidiary White Rock Insurance SAC Ltd. obtained a temporary restraining order that froze most of the Israeli startup’s assets. Aon also reported that certain letters of credit Vesttoo procured appeared to be fraudulent to Bermuda’s financial services regulator in 2023, according to court documents. Last year, White Rock also filed a civil lawsuit against China Construction Bank, according to court documents.
Lawyers representing CCB in White Rock’s civil lawsuit didn’t immediately return a message Thursday seeking comment. CCB has said in court papers that a former “low-level” employee based in Hong Kong didn’t have authority to issue billions of dollars in letters of credit on behalf of the bank.
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