(Bloomberg) -- Israeli insurance startup Vesttoo Ltd. filed bankruptcy after an Aon Plc subsidiary accused the company of presenting fraudulent letters of credit and a federal judge froze its assets.
Vesttoo and affiliates filed Chapter 11 Monday in Delaware, days after Judge Paul Engelmayer granted Aon subsidiary White Rock Insurance (SAC) Ltd. a temporary restraining order freezing most of the Israeli startup’s assets, according to court documents.
White Rock accused Vesttoo of pocketing millions of dollars in ill-gotten insurance premiums. The Aon subsidiary said it turned to federal court because it was worried the startup would move funds out of the business, an allegation Vesttoo denied.
Vesttoo in a statement Monday said filing Chapter 11 was necessary “in light of the various allegations related to the fraudulent letters of credit (LOCs) used on Vesttoo’s platform.”
The company is accused of presenting some $2 billion of fraudulent letters of credit, White Rock said in court papers. The Aon subsidiary said the letters of credit served as collateral for reinsurance transactions involving insurers White Rock worked with.
Vesttoo in court papers described White Rock’s accusations as “alleged past wrongdoing” and said it changed its management team in July. The startup said it took the matter very seriously when allegations of possible fraudulent letters of credit surfaced.
Vesttoo said it is “conducting a rigorous internal and external analysis of the events leading up to the first report of a fraudulent” letter of credit.
Vesttoo Interim CEO Ami Barlev said in a sworn statement that the startup “would be forced to cease virtually all operations” if Judge Engelmayer froze the company’s assets.
“Former executives and former management team members do not have access to or control over any of Vesttoo’s accounts,” Barlev said.
Aon and lawyers for White Rock didn’t return messages seeking comment.
(Updates with statement from company in paragraph four. A previous version corrected description of letter of credit allegations.)
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