Crisis-hit fintech Vesttoo has filed for Chapter 11 bankruptcy protection.
The Israeli-based firm, which utilizes artificial intelligence technology to bridge the insurance industry and capital markets, is grappling with multiple challenges. Earlier this month, the company announced plans to lay off 75% of its staff amid a growing scandal involving the alleged use of a fraudulent letter of credit in a multi-billion-dollar insurance transaction.
Additionally, the company is scheduled to appear in a New York court concerning a lawsuit and a temporary restraining order on its assets filed by Aon. Aon is seeking to recover nearly $137 million in funds that were swapped out of a White Rock cell and replaced with letters of credit that a bank deemed invalid.
Vesttoo believes that filing for Chapter 11 bankruptcy will provide it with the necessary “breathing room” to address the lawsuit and investigate those responsible for the letter of credit fraud, which the company attributes primarily to “external factors” such as foreign banks and financial institutions.
Banco Santander’s venture arm, Mouro Capital, had previously led an $80 million equity raise for Vesttoo at a $1 billion valuation in October. However, a planned $200 million funding round at double that valuation has been shelved due to the current crisis.