Vesttoo considers removing CEO

(Reuters) — Israeli fintech Vesttoo is considering the removal of its CEO and chief financial engineer, its board said in a statement Thursday, following a fake collateral scandal that analysts said could impact the wider insurance market.

Vesttoo, which uses artificial intelligence technology to connect the insurance industry and capital markets, said earlier this week it was laying off about 75% of its staff and closing some offices in Asia, as it tries to recover from a scandal over a fraudulent letter of credit used as collateral in a transaction with an insurer.

The board statement said Vesttoo was “exploring multiple options” for interim replacements for CEO Yaniv Bertele and Chief Financial Engineer Alon Lifshitz, but no decision had yet been made. Both Mr. Bertele and Mr. Lifshitz are on paid leave until a final decision is made.

Mr. Bertele and Mr. Lifshitz did not immediately respond to requests for comment.

There were no plans to liquidate the Tel Aviv-based company, Vesttoo said in the statement.

The company said it was closing its Tokyo, Hong Kong and Seoul offices, but would maintain staff in Tel Aviv, New York, London, Dubai and Bermuda.

Vesttoo — partly backed by Banco Santander’s fintech venture capital arm Mouro Capital — was in the process of raising around $200 million in a late-stage funding round that would have valued the firm at nearly $2 billion, but the company said this week it was currently not moving ahead with the fundraising.

Led by Mouro, Vesttoo last raised $80 million at a $1 billion value last October. At the time, it said it would use the funds to further expand its global presence.

Mouro did not immediately respond to a request for comment.

Vesttoo has said it is conducting an internal and external analysis of the events leading up to the first report of a fraudulent letter of credit that was used in many transactions.

DBRS Morningstar global head of insurance Marcos Alvarez said in a recent note that the issue with letters of credit “could have ramifications for the broader insurance and reinsurance market.”

Vesttoo’s platform aimed to provide insurers with alternative forms of reinsurance. If insurers’ reinsurance turns out not to be valid, they will need to find replacement cover, or pay any claims in full, industry sources say.