By Carolyn Cohn
LONDON (Reuters) – Israel-based fintech Vesttoo is seeking Chapter 11 bankruptcy protection in a U.S. court which will enable it to pursue legal action against those responsible for a fake collateral scandal, it said in a statement on Monday.
Vesttoo – partly backed by Banco Santander’s fintech venture capital arm Mouro Capital – has laid off staff, closed offices and appointed an interim chief executive following the discovery of fraudulent letters of credit used on its platform.
“We believe the steps we are taking are best for Vesttoo’s long-term growth and success,” interim CEO Ami Barlev said in the statement.
“Not only will they result in a strong, more sustainable capital structure, but they will provide us with the platform to aggressively pursue all parties that harmed our business.”
Vesttoo provides insurers with access to so-called insurance-linked securities – an alternative form of reinsurance. These securities may be backed by collateral in the form of letters of credit.
The company has conducted internal and external analysis of events leading up to the first report of a fraudulent letter of credit that was used in many transactions.
Led by Mouro, Vesttoo last raised $80 million at a $1 billion valuation last October.
In its bankruptcy filing, Vesttoo said it had appointed law firm DLA Piper and financial adviser Kroll to represent the firm.