Markel Bermuda has joined a committee of creditors in the bankruptcy of Vesttoo.

The Tel Aviv-based insurtech is in Chapter 11 in Delaware, while a related entity in Bermuda is in liquidation, after it was found that fake collateral was used in transactions on the company’s platform.

In an announcement, Markel Bermuda said it has been “appointed to the statutory committee of unsecured creditors” in the Delaware bankruptcy.

Its involvement in the proceedings is related to two collateralised reinsurance transactions done via a segregated account platform run by White Rock Insurance (SAC).

Markel Bermuda explained that it “ceded collateral protection insurance risk to the segregated account”, which was to provide collateral to Markel Bermuda.

“The letters of credit were provided as collateral backstops in the event claims were made and not paid on the underlying policies for these transactions. These letters of credit, one for $50 million and the other for $77.75 million, were later deemed to be fraudulent.”

Vesttoo, which was to be the eBay of reinsurance, was founded in 2018. It registered a collateralised insurer in Bermuda in 2022.

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

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.

In early August, Vesttoo Alpha P&C, the Bermuda entity at the centre of the troubled insurtech’s operations, was placed into liquidation by the Bermuda Monetary Authority. Later in the month, a raft of Vesttoo related companies filed for bankruptcy protection in Delaware.

In total, 48 Vesttoo entities – including corporations and limited partnerships – were listed in Delaware Chapter 11 filings in August. The list includes entities named Vesttoo Japan, Vesttoo Malta and Vesttoo Korea.

Filings have also been made by liquidators to initiate Chapter 15 proceedings, which could increase co-operation between courts in different jurisdictions as the Vesttoo and related companies globally are investigated.

Most of the company’s employees have been terminated, including CEO Yaniv Bertele and chief financial engineer Alon Lifshitz, two of the founders of Vesttoo.

Recent reports indicate the involvement of Yu Po Holdings and related companies, which are incorporated in Hong Kong.

They are said to have been the providers of the collateral, which was in the form of letters of credit provided by the banks, reportedly China Construction Bank and Standard Chartered Bank.

Markel Bermuda is a Class 4 Bermuda insurer and a subsidiary of New York Stock Exchange-listed Markel Group, a Virginia-based insurance group with a $20 billion market capitalisation.