Vesttoo identifies fraud participants
Vesttoo filed its first interim report in the United States Bankruptcy Court for the District of Delaware.
According to the company, the investigation has identified that “pervasive and systemic misconduct” was engaged in by a limited set of Vesttoo executives and other third-parties outside of Vesttoo. This misconduct was shielded from the majority of Vesttoo’s employees, the Board of Directors and the insurance markets.
Below is a snippet from the report.
“To date, the forensic and documentary evidence has confirmed that a conspiracy to perpetuate a fraudulent scheme relating to the LOCs existed. It has also confirmed that that conspiracy included two members of Vesttoo’s senior leadership (Bertele and Lifshitz). Participants in the conspiracy included the following individuals who were (at least for part of the time of the conspiracy) employees of Vesttoo: Bertele, Lifshitz, Ginati (Senior Director of Capital Markets at Vesttoo, and worked as a “finder,” ostensibly locating and developing investors), Rurka (Senior Director, Capital Markets, and worked with Ginati as a finder), and Tal Eli Ezer (“Ezer”) (who worked as another finder).
In addition to Bertele, Lifshitz, Ginati, Ezer, and Rurka the investigation has established that this conspiracy involved individuals associated with the Debtors’ largest investor in the Debtors’ transactions, a company known as Yu Po Holdings Ltd. (“Yu Po”), as well as employees of China Construction Bank (“CCB”) and Standard Chartered Bank (“SCB”). One of the individuals associated with Yu Po is an individual referred to as both “Alan Wang” and “David Fu” (“Wang/Fu”). Wang/Fu communicated with Ginati using four separate email addresses, including an e-mail address specifically indicating he was potentially an employee or principal of Yu Po, firstname.lastname@example.org. Precisely what formal role he played at Yu Po remains unclear, but it is apparent that he represented their interests. Although Wang/Fu appears to have played such a role for Yu Po and may have had some formal affiliation – as indicated by that “Yu Po Finance” e-mail address – he was also treated by Bertele and Ginati as a “finder” for Vesttoo itself, working with Ginati to locate investors. Indeed, in September 2021 Wang/Fu was named by Bertele as a “Senior Director, Asian Markets” for Vesttoo, and Bertele requested that he be given an official Vesttoo e-mail address.
Significantly, the evidence establishes the direct involvement of Bertele and Lifshitz in the creation of fraudulent documents, a process of creation that in many cases can be pieced together from forensic evidence retrieved from the Vesttoo computer systems. The evidence also establishes the leading role played by Ginati, in collusion with Yu Po and an employee of CCB, to generate the fraudulent CCB LOCs
The evidence also supports the following key findings (some of which are described in further detail below):
- In numerous instances Ginati and others worked with bank employees and the principals of Yu Po, apparently behind the backs of fellow Vesttoo employees, to draft documents and emails that the bank employees then send to the other Vesttoo employees, without any disclosure that those communications were drafted by and coordinated with Ginati.
- In 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 then sending them to White Rock and others.
- This creation of fraudulent documents includes multiple instances where Bertele uses his personal Gmail account to create forged signatures that purport to be the signatures of bank employees on those documents, which then get submitted by Lifshitz to White Rock and others.
- The investigation also uncovered 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.
- The evidence also plainly demonstrates that to protect their scheme, Bertele and Lifshitz went so far as to create a wholly fictitious person they held out as an employee of Santander, using this non-existent person to “sign” fraudulent documents and giving this “person” his own telephone number (which was in fact forwarded to Bertele’s cell phone) that Bertele and Lifshitz used to thwart efforts of external parties to verify the existence of certain LOCs.
- Indeed, although numerous and very serious red flags were raised about Yu Po, including in the face of very substantial evidence that the CCB LOCs, which on their face indicated that they were issued out of New York, were in fact issued out of China, no significant action was taken. Reflecting the dedication of a number of other Vesttoo executives, as early as June 2022 (and perhaps earlier), the CFO of Vesttoo believed Yu Po raised “existential” risks to Vesttoo, but these concerns were disregarded angrily by Bertele and any efforts of others to meet directly with Yu Po without Ginati were blocked.
- Other 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.
While the factual record is being finalized, certain evidence is now clear: the LOCs that were the foundation of Vesttoo’s business were largely illusory. An understanding of the magnitude of the underlying transactions is critical. Since 2020, Vesttoo quoted 96 but closed 65 transactions with collateral totaling $3.932 billion, of which 79% ($3.1 billion) were with Yu Po. Approximately $586 million were with the Chinese investor Cheng Yuan Holdings. Of these transactions, standby LOCs were issued by the following banks:
- CCB: $2.81 billion
- SCB: $362.5 million
- Santander Bank: $186 million
Of these LOCs, the banks have confirmed that the vast majority of the LOCs are fraudulent.”
The Report was prepared to provide an update on the four core objectives of the bankruptcy cases: (1) identify the root cause of the company’s collapse through a comprehensive internal investigation; (2) establish a process to pursue those individuals and entities that had caused the harm to Vesttoo; (3) create institutional controls to address those shortcomings found in the Company’s on-going investigation and provide timely information to regulators throughout the world; and (4) re-formulate the Company’s strategic business plan.
With regard to the investigation, the report highlights the full and transparent investigation by the that was commenced at the direction of a Special Committee of the Vesttoo Board of Directors almost immediately after the allegations related to the letters of credit used on Vesttoo’s platform surfaced. Throughout the investigation, the investigation team was given unfettered access to Company documents and systems, as well as employees and others within the control of the Company. While the investigation is substantially complete, there are still additional interviews, documents and other information that need to be reviewed before submitting the final report.
Lastly, the company is sharing that Yaniv Bertele’s attempt to install attorney Ziv Ironi to serve on Vesttoo’s board on his behalf was not accepted by the Board of Directors, and Bertele was subsequently removed from the Board.
“The investigation has confirmed that this scheme was confined to the following Vesttoo executives – Yaniv Bertele (former CEO), Alon Lifshitz (former CFE), Udi Ginati (former Senior Director, Capital Markets) and Josh Rurka (former Senior Director, Asian Markets), who acted with external entities such as employees of China Construction Bank and Standard Chartered. While we obviously remain very troubled by the misconduct of those that the company and markets placed great trust in, we are pleased that the investigation has confirmed that this scheme was confined to a small subset of the Vesttoo leadership team. The company’s technology platform and its core value remain strong and we intend to use it and our deeply experienced insurance professionals to emerge from this process as a trusted partner.” – Ami Barlev, Vesttoo’s interim CEO.