During its bankruptcy case, beleaguered insurtech Vesttoo has been approved by the court to continue paying its staff, including certain employee benefits and expenses, but at a hearing this week the US Trustee balked at the suggestion terminated staff and founders may receive payments.
Vesttoo, through its counsel, had applied to the bankruptcy court to have the ability to continue paying its workers, asking for the approval to use its bank accounts to do so.
This included wages, certain employee benefits and expenses, as well as other compensation due.
The company had previously said that freezing its assets would be “catastrophic” for it, but still it must get court approval to use any of its funds, as the Chapter 11 proceedings look to protect the value remaining for its creditors.
The rationale for continuing to make these payments was included in a declaratory statement from Interim Vesttoo CEO Ami Barlev, in which he also requested the ability for the company to make termination payments to fired workers.
Barlev’s declaratory statement was updated, to include further details and to reflect the will of the court, as it is used to support the various motions that had been filed by Vesttoo.
Part of that was to include text to explain that no insiders of the company, or its founders, would receive any termination payments under the wage-related motion that had been filed.
Recall, that Vesttoo previously placed two of its co-founders on paid leave, with CEO Yaniv Bertele and Chief Financial Engineer Alon Lifshitz both removed from their positions by the Board while the investigation into the issues and alleged fraud with letters of credit (LOCs) provided by banks to back reinsurance deals the insurtech had facilitated continued.
Prior to that, Vesttoo had also laid off roughly 75% of its global workforce.
Given the court proceedings this week, it’s unclear whether any payments to the co-founders continue, or are possible. But what certainly isn’t possible is termination payments.
During the court hearing on Wednesday, which we reported on at the time to highlight the approval of an interim order to enforce an automatic stay against the Aon White Rock action in Bermuda (although we suspect BMA action can continue), the representative of the US trustee balked at any termination payments at all being made.
Barlev, during that hearing, was asked to clarify that no founder termination payments would be made as well, which is a statement now added to his declaratory filing to the Chapter 11 proceedings.
Vesttoo can continue to pay the salaries, benefits and expenses of its employees, and all of the relief it had requested, to make these payments, was approved, with the exception of the termination payments.
In sum, payments totalling almost $2.79 million were approved, while an additional almost $2.2 million related to the termination payments considered due was not.
Any approval of termination payments will now have to come from a further order of the court, it appears.
The US trustee argued that Vesttoo has not provided enough evidence yet to support paying termination amounts to fired staff.
Given there is an ongoing investigation into an alleged fraud, there is still no clarity as to whether any staff have been implicated at this time. On the other side, Vesttoo’s counsel argued that the termination payments are required under Israeli law.
What’s most interesting perhaps, are the changes made to Barlev’s declaratory statement, where it was requesting the ability to make exit payments to Vesttoo staff, but explicitly stated that this would not include insiders or co-founders.
The court took a broader approach and denied any rights to make termination payments to any staff member, until a further order has been filed and approved.
But the additional text in Barlev’s declaration suggests that termination payments to founders may not be on the agenda at all.