After broker Aon’s segregated accounts and transformer company White Rock Insurance (SAC) Ltd. and the joint provisional liquidators of cells of the structure, filed a Chapter 15 to gain greater control of the cells exposed to the Vesttoo fraud issue, the insurtech has now filed to have White Rock and the JPLs held in contempt of the bankruptcy court proceeding.
The JPLs, Michael Morrison and Charles Thresh of Teneo, and Aon’s White Rock SAC, launched a Chapter 15 case earlier this week, seeking another avenue through which to continue their investigation and liquidation of the Vesttoo-exposed reinsurance cells of the White Rock structure.
As we also reported this week, Aon’s White Rock Insurance (SAC) Ltd. filed its opposition to Vesttoo’s bankruptcy case motion to enforce an automatic stay against the legal action it was taking, in which it revealed there were 37 letters of credit (LOCs) assumed to be invalid or fraudulent, representing some $2.35 billion in value.
That filing came as a result of the Chapter 15 it now seems, as under the Chapter 15 the JPLs and White Rock are seeking the ability to continue the investigation and liquidation of the segregated cells linked to the Vesttoo facilitated reinsurance deals that had fake letters of credit (LOCs).
The JPLs and White Rock want to be able to remedy the issue for their clients and the cedents involved.
By securing access to the cells in question, so that they can be liquidated or restructured and therefore the return of any assets that are available be secured for the clients / cedents involved.
As we also previously reported, a proposed automatic stay order appeared to have been agreed between the parties, after Vesttoo’s lawyers engaged with the counsel for Aon’s White Rock Insurance (SAC) Ltd. and the Joint Provisional Liquidators for the White Rock cells that are subject to Bermuda court action.
But then White Rock filed its opposition to that motion and the Chapter 15 case sees the JPLs and White Rock looking to continue their work to remedy the issue for the affected clients.
At which Vesttoo has now balked, highlighting to the Chapter 11 bankruptcy court that, by entering into the consent order for a proposed automatic stay, White Rock and the JPLs had agreed “to conduct themselves as if the automatic stay applies to the Segregated Accounts and the property within the Segregated Accounts absent further order of this Court.”
Vesttoo also states that White Rock and the JPLs had agreed to “not take any action that violates the automatic stay applicable to the Debtors’ bankruptcy cases without first obtaining further relief from this Court . . . [and] not take any action to obtain possession of property of these estates or of property from the Debtors’ estates or to exercise control over property of the Debtors’ estates.”
Vesttoo’s filing goes on to state that within 4 days of that agreement being made, the Chapter 15 case was filed.
“The JPLs filed a chapter 15 case in which they acknowledge that the Debtors have a beneficial interest in the Segregated Accounts. The JPLs also seek to have the assets in those Segregated Accounts entrusted to them and to have the Debtors subjected to a stay so that the JPLs can work with the cedents (many of whom submit themselves as creditors in these cases) restructure the Segregated Accounts instead of the Debtors being able to do so, including conducting an investigation into the Debtors rather than allowing the Debtors to do so,” Vesttoo’s filing states.
As a result, the insurtech says, of White Rock and the JPLs, “not only have they violated the stay again, they have now violated an Order of this Court.”
Then go on to ask the bankruptcy court to “find White Rock and the JPLs in contempt of the Interim Stay Order.”
Aon, via its White Rock SAC structure, continues to seek ways to secure control of the segregated cells linked to its clients reinsurance arrangements, enabling it to both identify whether there are assets available to be distributed back to those clients that had paid premiums, while also being able to investigate the matter more directly.
Vesttoo would claim it is using the powers of the bankruptcy court to bring any action under one roof and protect its remaining assets for all of its creditors.
But, it feels like a thorough investigation of the segregated cells in question, to identify what if any assets remain, is warranted at this time, and that any assets need protecting and securing for the benefit of the creditor(s) that had specific reinsurance deals linked to those cells, that ended up backed by invalid or fraudulent letters of credit (LOCs).
There is a question over whether any assets actually remain available, or not, given previously Vesttoo had claimed it received a distribution from them of almost $137 million, that presumably was ‘given’ to the supposed investors backing the now known to be invalid or faked LOCs.
But, as time moves on the clients and cedents involved in these reinsurance deals, who entered into them freely under the impression the counterparty collateral or promise to pay was there to support them, could face additional stresses to their businesses over the lack of protection, while are also out of pocket in terms of premiums paid for reinsurance deals that now prove invalid and ineffective.
Meaning that, if there are assets remaining that can be traced to specific clients or cedents that entered into these fake-LOC backed reinsurance deals, then trying to secure their return for them is important.
The venue and court case that process happens under seems less important to us, as, assuming these are premium payment-related, the assets in question that may be held in accounts linked to the affected White Rock cells don’t really ‘belong’ to any party in the chain except for those clients and cedents that paid them in the first place.