White Rock, cell JPL’s and Vesttoo agree on a proposed automatic stay order

The latest in the Vesttoo bankruptcy case, is that the insurtech’s lawyers have engaged with 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, coming to an agreement for an order that would enforce an automatic stay on an interim basis.

As we reported last week, Aon, through its White Rock Insurance (SAC) Ltd. segregated account company and transformer vehicle, joined forces with the Bermuda Monetary Authority (BMA) to pursue “maximum recovery” for the re/insureds affected by the alleged fraud, involving Vesttoo-related segregated accounts used for reinsurance transactions the insurtech had facilitated.

The Bermuda Monetary Authority (BMA) and White Rock Insurance (SAC) Ltd. joined to pursue a course of action in the Supreme Court of Bermuda, targeting the liquidation of Vesttoo-related cells and the recovery of any assets linked to the affected reinsurance deals.

As we then reported yesterday, Vesttoo claimed in the bankruptcy court that the action being taken in Bermuda by White Rock and the BMA was in violation of the automatic stay, that began with its Chapter 11 filing.

Then we reported yesterday that, as we had reported was likely to occur, Vesttoo was claiming ownership of the White Rock Insurance (SAC) Ltd. segregated cells or accounts that are subject to the legal action, as it sought to have the automatic stay enforced.

Now, the latest filings show that Vesttoo’s legal counsel has been in discussion with those of Aon’s White Rock and the putative Joint Provisional Liquidators that had been assigned to the liquidation of the Vesttoo-related cells.

After those discussions, the parties have reached agreement on a revised form of a Proposed Order that would grant certain relief, related to the stay, that was being requested by Vesttoo under the bankruptcy court.

A proposed motion states, remembering that the parties are said to have all agreed to this so it only requires approval as an order by the Delaware bankruptcy court, “White Rock and the JPLs shall not take any action that violates the automatic stay applicable to the Debtors’ bankruptcy cases without first obtaining further relief from this Court.”

Also that, “White Rock and the JPLs agree 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.”

Finally that, “Without limiting the foregoing, White Rock and the JPLs shall 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.”

However, at a bankruptcy hearing today, the judge highlighted that an exception to the “automatic stay” under bankruptcy laws, is that action can be pursued if a government intends to exert its police or regulatory powers, which suggests that the Bermuda Monetary Authority (BMA) action in the Bermuda Supreme Court may be able to proceed without being subject to the stay.

We had mentioned this exception on police or regulatory powers, that is available under the US bankruptcy laws, in an article on Monday and it seems that the inclusion of language related to this will enable government instigated actions in Bermuda, or perhaps Israel, to continue.

So, while White Rock and the JPL’s are agreeing to not take action that violates the automatic stay without bankruptcy court relief being sought first, to move forwards as if the stay applies to the segregated accounts and their contents, and not to take any action to obtain contents of the cells or exercise control over it, the BMA action may still be able to proceed in Bermuda, but in the knowledge that certain actions cannot be taken without prior approval of the bankruptcy court.

It would provide the relief Vesttoo has sought, while being a productive move to protect the White Rock cells and contents, bringing White Rock under the bankruptcy court process as well, as they are now set to appear as creditors having filed as such, along with the JPL’s.

Which means this motion, if approved, will effectively protect the cells and any contents. Which is positive for those seeking to realise value for the ultimate clients and cedents behind the transactions that are allegedly affected by invalid letters of credit (LOCs), while also folding further actions under the bankruptcy case. But, at the same time this may enable the BMA to continue its action and investigations in Bermuda as well as a government regulatory move.

Should the BMA, or Aon via White Rock, decide action against the cells is warranted that might violate the stay, they will need to obtain further relief to do so from the bankruptcy court, it would seem, if this proposed motion is enforced by the court.

It’s important to remember, that the automatic stay does not preclude Vesttoo from being subject to any investigation, oversight or disclosure, it just seeks to protect assets related to the bankruptcy estate. It’s also important to remember this motion is interim in nature, so its protection will expire.

It’s also worth noting that the counsel for White Rock and the JPL’s said that they do not believe their actions taken against the cells had violated the stay anyway.

Update: The judge in the bankruptcy case has just approved the order, so this interim motion will be submitted for entry to the bankruptcy court.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.