Vesttoo To Lay Off 75% Of Its Global Workforce Amid Fraud Allegations
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Israeli startup known as Vesttoo has announced a plan to lay off around 150 employees. These employees account for 75% of the company’s entire workforce. The majority of employees at the company work at its headquarters in Israel.
Vesttoo to lay off 75% of its workforce
The Israeli startup has released a statement saying that it appeared that the procedures used at Vesttoo had been circumvented. The company’s CEO, Yaniv Bertele, published an email to the company’s employees saying that the company had made a difficult decision to lay off employees across multiple locations and teams.
“I am writing to you today with great sorrow to inform you that we have reached the incredibly difficult decision to part ways with many of our people across all teams and geographies at Vesttoo, and I would like to share the considerations that led to this very painful choice,” Bertele said.
The letter said that over the last two weeks, the company evaluated different options to guarantee that Vesttoo weathered the storm to make rebuilding easy. The email also said that despite the crisis that has rocked the company, it was still committed to its approach to transforming the reinsurance sector by bringing insurance and capital markets together.
The company said that it was laying off employees over uncertainty about the process’s duration and ensuring that the company had a fighting chance at survival. The changes focus on preserving and ensuring that the data-driven solution and marketplace offered by Vesttoo provide solutions to the affected clients.
Scandal at Vesttoo
The FBI has said it has launched investigations into alleged fraud at Vesttoo. The fraud allegations surrounding Vesttoo are linked to several US insurance firms that have issued notices in recent weeks about the status of their collateral and their relationship with the Israeli firm.
The issue also revolves around alleged fake letters of credit (LOCs) provided to insurers by investors to support reinsurance transactions on Vesttoo. These LOCs are believed to have totaled around $4 billion. The fraud allegations were revealed after one of these LOCs was determined to be fake and resulted in a broad review of the letters of credit issued by the firm.
Bertele said that regarding the company’s investigation, it was taking measures to determine the nature of these LOCs and where they originated. As such, Bertele noted that it seems like external parties hijacked the processes used by Vesttoo, but the platform was committed to understanding what had happened. It was working with experienced investigators toward the same.
A recent report by Reuters has said that the Israeli fintech is currently considering ousting the chief executive and the chief financial engineer as the woes deepen. A statement from the board said that the company was currently exploring different options for the interim replacements for the two executives, but a decision was yet to be reached.
