Vesttoo insisted in a statement that it followed proper know-your-customer procedures and that it is trying to help replace collateral found to be fraudulent.

The reassurances, issued by the start-up via a public relations consultant, came as the market struggles to determine the full cost of alleged failures on the company’s platform, as lawsuits are filed against insurers with exposure to Vesttoo, and as law enforcement in the United States gets involved.

“The company can confirm that standard KYC was conducted on all parties internally as well as by external organisations,” the statement read.

“Vesttoo is committed to working with alternative investors and brokers to ascertain alternative collateral for our clients. We are in active discussions with potential investors for this purpose,” it continued.

Founded in 2018, the company aims to be the eBay of reinsurance.

Vesttoo registered a collateralised insurer in Bermuda in 2022, and the jurisdiction has been identified as the hub of the innovative marketplace.

In late July, reports surfaced that collateral used in some transactions had been found to be fraudulent.

Tel Aviv-headquartered Vesttoo quickly confirmed that "inconsistencies“ had been uncovered. It has not put a number on the size of the problem, but press reports place the total for fake collateral at $4 billion.

State-owned China Construction Bank was the source of some of the possibly counterfeit collateral, according to some publications, and Standard Chartered was later named.

The company has fired about 150 of approximately 200 employees and put the chief executive on leave, while the US Federal Bureau of Investigation is reported to be looking into the situation and AM Best has put an insurer with exposure to Vesttoo under review with negative implications.

Trade publication reports suggest that uncertainty and the sudden need for replacement collateral have unsettled the market. Vesttoo has not released an estimate as to how much collateral may have been bad.

“The company continues its rigorous external investigation into the circumstances surrounding the suspected fraud of letters of credit used as collateral in its transactions. The company is fully co-operating with all parties investigating the matter,” the statement read.

“While the company has lost a significant amount of senior executives, it retains a very experienced and committed core team of more than 50 people who are focused on working with the markets to resolve these issues and is actively corresponding with the various regulatory bodies worldwide regarding the situation, as well as harnessing our technological suite and platform to find potential solutions.

“Vesttoo and its board of directors confirm once again that the company will meet all of its commitments to suppliers and consultants,” it added.

The Bermuda Monetary Authority has not replied to requests for an update beyond an initial written statement.