A former China Construction Bank employee is facing bribery charges in Hong Kong, accused of accepting payments in a crypto currency amounting to US $470,000 from a Vesttoo employee, to authenticate false letters of credit and collateral documentation.
While a number of court cases remain ongoing, although not moving at any meaningful pace, in relation to the Vesttoo reinsurance letter of credit (LOC) collateral fraud, criminal cases have been absent from the saga until now when a Hong Kong bribery case has taken aim at a former China Construction Bank employee.
Recall that, China Construction Bank was the financial entity that purportedly issued billions of dollars of letters of credit (LOC) that were used to collateralize reinsurance agreements in transactions involving the now bankrupt Israeli insurtech Vesttoo.
More traditional reinsurance than ILS, those agreements turned out to be supported by thin air as the letters of credit (LOCs) turned out to be forged.
As the bankruptcy of Vesttoo moved forward, details emerged of a relatively unsophisticated web of fraud, with international tentacles reaching to the Chinese state supported bank and a number of lawsuits launched against China Construction Bank by reinsurance market participants, some ongoing.
In total, almost $3.36 billion of standby letters of credit (LOC) are presumed to have been fraudulently created under the Vesttoo scheme and of that amount, figures Artemis had seen towards the end of 2023 suggested that at least $2.81 billion of those were linked to China Construction Bank.
Emails that emerged during Vesttoo’s bankruptcy case showed that a China Construction Bank (CCB) employee, Chun-Yin Lam, used an official bank email address to communicate with some of the Vesttoo employees that had been accused of perpetrating the fraud.
While this CCB employee, Lam, was also said to have identified the Chinese investor implicated in the fraud, Yu Po Holdings, as a client of the bank (Yu Po Holdings was the name of the primary investor in reinsurance transactions involving fraudulent LOCs issued by CCB for Vesttoo reinsurance deals), questions remained over whether Yu Po actually existed as an investor, or was merely a shell used for the fraud. Many continue to believe the latter was the more likely scenario.
This same, now former CCB bank employee is at the heart of a new bribery and corruption case in the Eastern Magistrates’ Courts of Hong Kong.
The Independent Commission Against Corruption (ICAC) of the Hong Kong Special Administrative Region has now charged two former bank managers, one being the aforementioned Lam, for “allegedly conspiring with an employee of a fintech company to use various false standby letters of credit (L/Cs) and collateral letters.”
That fintech was, of course, Vesttoo.
The ICAC explained, “Pursuant to the further legal advice of the Department of Justice upon completion of investigation by the ICAC, an additional bribery charge was laid against one of the duo while the indictment in relation to the two counts of conspiracy to use false instruments were amended when the case was brought to the Eastern Magistrates’ Courts for mention today (June 5).
“The additional charge alleged that the defendant had accepted cryptocurrency worth over US$470,000 from the fintech company employee, a middleman and others for authenticating false instruments. The case will be transferred to the District Court.”
Lam, a former relationship manager of China Construction Bank (Asia) Corporation Limited (CCB (Asia)), has been charged with an additional count of conspiracy for “an agent to accept advantages, contrary to section 9(1)(a) of the Prevention of Bribery Ordinance and section 159A of the Crimes Ordinance,” the ICAC said.
Lee Ka-man, a former senior relationship manager of Standard Chartered Bank (Hong Kong) Limited (Standard Chartered HK), which was another bank named as having been identified on some of the fraudulent letters of credit that Vesttoo had used for its reinsurance transactions, as well as Lam now each face one count of conspiracy to use false instruments as well.
After a hearing today, the defendants have been granted bail and the prosecution are seeking to transfer the case to the District Court for plea.
The ICAC said that its investigation into the allegations against the bank employees stemmed from a corruption complaint.
The ICAC further explained, “The bribery charge alleged that Lam had accepted bribes, namely Tether, a cryptocurrency, worth totalling over US$470,000, from an employee of Vesttoo Udi Ginati, a middleman Wan Cheuk-lun and others for authenticating standby L/Cs and collateral letters which were purportedly issued or endorsed by China Construction Bank Corporation (CCB). CCB had, in fact, never issued or endorsed those documents.”
Ginati was cited as an alleged participant in the fraud by Vesttoo itself, after an internal investigation it undertook back in 2023.
It’s perhaps worth noting that in early 2024 an attempt by Vesttoo to recover damages from those alleged former employees it believed participated in the fraud, including Ginati, failed in a Tel Aviv court.
Hong Kong’s ICAC continued, “The amended charges of conspiracy to use false instruments alleged that Lam had conspired together with the said Vesttoo employee, middleman and others to use 88 false standby L/Cs and two false collateral letters purportedly issued or endorsed by CCB, with the intention of inducing others to accept them as genuine. It was alleged that Lee had conspired together with others to use four false standby L/Cs purportedly issued by Standard Chartered HK with intent to induce others to accept them as genuine.”
The ICAC said that CCB (Asia) and Standard Chartered HK rendered full assistance to the Commission during its investigation into this case.
The Vesttoo saga is the story that keeps on giving.
Given the backdrop to the saga, and all the information that came out about how the web of fraud is alleged to have been committed, none of the allegations made by Hong Kong’s Independent Commission Against Corruption are all that surprising to read.
It is good to see authorities seeking to make progress on getting to the bottom of what happened and potentially bringing those accused of perpetrating the fraud to account. Or at the least, establishing what illegalities may have taken place throughout the saga.
That said, none of this appears to get the industry participants that in some cases lost hundreds of millions of dollars any closer to making meaningful recoveries for the damages suffered.
Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.
