Hong Kong jails ex — CCB manager over Vesttoo collateral fraud

6 billion ICAC says Lam accepted over $470,000 in Tether cryptocurrency between April and June 2022 By Ashish Tiwari Sept 18 (The Insurer) — A former manager at China Construction Bank (Asia) was sentenced to four years in prison on Friday for accepting bribes to authenticate false standby letters of credit tied to insurance-related investment transactions facilitated by defunct insurtech Vesttoo, Hong Kong’s anti-graft agency said. Lam Chun-yin, a former relationship manager at CCB (Asia), pleaded guilty to conspiring to accept bribes worth more than $470,000 in Tether cryptocurrency, the Independent Commission Against Corruption (ICAC) said.

In return, Lam authenticated multiple false standby letters of credit purportedly issued by China Construction Bank, as well as collateral letters purportedly issued by investor Yu Po Holdings, the ICAC said. 6 billion. Lam's sentencing is the latest development in the Vesttoo scandal, which erupted in 2023 after banks denied issuing some letters of credit that had been used as collateral for reinsurance-related transactions arranged via the Israeli startup. The disputed documents left insurers and other counterparties without the bank-backed protection they believed supported the deals.

Judge Ernest Lin Kam-hung said the “criminality of the defendant in this case was higher than in other similar cases since it involved forged bank documents that undermined Hong Kong’s reputation as an international financial centre and exposed the bank concerned to significant potential risk”. The judge set a starting sentence of six years and reduced it by one-third for Lam's guilty plea. 7 million to CCB (Asia), equivalent to the bribes involved. The ICAC said Lam, who worked in the consumer banking division at CCB (Asia)'s Causeway Bay retail branch, was never authorised to process applications for business credit facilities and letters of credit.

The agency said Lam falsely presented himself in early 2022 as CCB's contact point for issuing standby letters of credit for Yu Po, which had become an investor through Vesttoo. Between April and June 2022, Lam conspired with a Vesttoo department head and others to accept the Tether payments in exchange for authenticating the false documents, the ICAC said. Neither CCB nor its sister firms issued the relevant letters of credit or collateral letters, the agency said. CCB (Asia) uncovered the matter through an internal investigation, referred it to the ICAC and assisted the inquiry.

Vesttoo, an Israel-based insurtech that provided insurers access to insurance-linked securities and reinsurance capacity backed in part by letters of credit, sought Chapter 11 bankruptcy protection in 2023 after fraudulent collateral documents were discovered on its platform. Its collapse triggered litigation across the insurance market involving insurers, brokers, Vesttoo's liquidating trust and CCB. In April, a New York court allowed Aon unit White Rock Insurance to pursue most of its claims against CCB over the disputed collateral, including claims based on allegations that Lam's position and use of bank channels gave the documents apparent legitimacy.

CCB has denied issuing the letters of credit.