An insurtech with a business model built around a new and innovative Bermuda licence being tested as collateral, key to the business, is being called into question.

Neither Vesttoo, the Goldman Sachs-backed unicorn facing trouble, nor the Bermuda Monetary Authority, the regulator of the entity at the centre of the storm, have responded to requests for comment.

According to Israel’s CTech, the company may have found $4 billion of fake collateral backing transactions. The publication adds that forged letters of credit from Chinese banks might have been used.

According to Artemis, a reinsurance trade publication, Vesttoo has done business with China Construction Bank, one of the country’s largest lenders, although it is not clear whether that institution issued the LoCs used for collateral.

Vesttoo’s technology is designed to evaluate the risk of a transaction, and the acceptance of the allegedly forged collateral may have been a systems failure. CTech reports that Vesttoo suspects some of its employees may have been aware that fraudulent LoCs could be used to complete transactions.

According to Israel’s Globes newspaper, Vesttoo’s board has hired an investigator and law firms to look into the matter.

Tel Aviv’s Vesttoo was founded in 2018. It received initial funding from cryptocurrency entrepreneurs and, according to Crunchbase, raised $110 million in six funding rounds.

Goldman Sachs participated in the most recent round of funding, which was led by Britain’s Mouro Capital and valued the company at more than $1 billion, taking Vesttoo above the threshold for being considered a unicorn.

Vesttoo operates as a marketplace for non-catastrophe insurance-based risk transfer and investments, an innovative twist on the insurance-linked securities market.

Bermuda is an essential component in the company’s business model, and a recently developed class of insurance licence was used to facilitate the company’s marketplace concept.

Vesttoo Alpha P&C was registered in late 2022 with the BMA as a collateralised insurer, a class introduced by the BMA in 2019. Collateralised insurers must maintain a head office in Bermuda and appoint a resident principal representative.

According to BMA records, Vesttoo Alpha P&C is a regulated entity with a registered address at 45 Reid Street, Hamilton, Bermuda.

A company executive said in an interview that the Bermuda structure is the keystone to the whole enterprise.

In late 2022, Rob Hauff, who was a portfolio manager at Vesttoo and remains an adviser, said of the Bermuda entity: “That is really the centrepiece that sits in the middle.“

Vesttoo also has offices in New York, London, Dubai, Seoul, Hong Kong and Berlin.

In comments to insurance trade publications in recent days, the company conceded that there may have been issues with its accounts. It noted that in two transactions “inconsistencies” were found in the collateral, according to one article, although Vesttoo insists there has been no fraud.

The company also said that a third-party audit is being undertaken.

Since the news broke of potential collateral problems, resignations of company leaders have been reported. According to Globes, Vesttoo’s deputy chief legal officer, interim chief legal officer and chief financial officer have left.

According to the Insurer, Bermuda-based Julia Henderson resigned from Vesttoo as chief commercial officer.

Vesttoo does not appear to have a significant presence in Bermuda. It is not listed as a tenant at Wessex House, which is at 45 Reid Street, Vesttoo’s registered address.