Vesttoo creditors' liquidating trustee accuses McKinsey of 'gross negligence' in advisory role

By Isha Marathe

Aug 13 - (The Insurer) - The trustee of the Vesttoo creditors' liquidating trust, Lawrence Hirsh, sued McKinsey & Company and McKinsey Israel on Wednesday for allegedly providing false information to cedents and ignoring how a hyper-concentrated reinsurance investment business posed an existential risk to Vesttoo before a fraudulent letters of credit scandal led to its collapse.

In his prayer for relief filed in Delaware's bankruptcy court, Hirsh is seeking an avoidance and recovery of $3,706,949 in alleged fraudulent transfers and $1,248,000 in avoidable preferences, in addition to damages to be determined at trial.

A McKinsey spokesperson called Vesttoo's legal claims "baseless" in an email to The Insurer. The company told The Insurer that it had no role in vetting new or existing investors in Vesttoo and had no knowledge of any fraud.

"Vesttoo’s losses and ultimate bankruptcy arose from its own brazen fraud, which was intentionally concealed by Vesttoo to enrich the company and its insiders," the spokesperson said.

As soon as McKinsey, which served as an advisor to Vesttoo's investor and growth strategy in 2022 and 2023, "became aware of Vesttoo's fraud, we terminated our contract", the spokesperson said.

Hirsh, on behalf of the Vesttoo liquidation trust, is suing McKinsey on five counts, including alleged breach of contract to conduct due diligence into investors, gross negligence by failing to take action to address risks or advise Vesttoo of their severity, avoidance and recovery of transfers, and disallowance of all claims.

Counsel for Hirsh did not immediately respond to a request for comment.

As The Insurer previously reported on Thursday, Hirsh also filed a complaint on Wednesday against Aon and China Construction Bank (CCB) alleging fraudulent conduct and other wrongdoing in relation to collateral protection insurance (CPI) transactions.

Insurtech startup Vesttoo collapsed in July 2023 after public disclosure that reinsurance investors, including Yu Po Holdings, Hujie Holdings and Cheng Yuan Holdings, colluded with certain Vesttoo employees to provide fraudulent or otherwise unauthorized letters of credit to collateralize reinsurance transactions arranged through the company.

The complaint against McKinsey alleges the company served as an advisor and self-proclaimed "wingman" to Vesttoo in the yearlong lead-up to its collapse and acted as a consultant for business and investor development, growth strategy, risk management and compliance functions for the startup.

The complaint said that McKinsey agreed to evaluate current and potential investor targets, identify risks to Vesttoo, generate business cases for increased growth and partner with Vesttoo to achieve “(i)ndustry-leading risk and compliance capabilities” that would allow Vesttoo to grow its business.

"But McKinsey never seriously undertook to fulfill any of these promises," Hirsh said in his complaint.

"Instead, blinded by millions of dollars in fees and the promise of Vesttoo’s future growth, McKinsey conducted only a cursory review of Vesttoo’s primary investor Yu Po, a largely unknown Chinese entity without any public presence that was supposedly providing billions of dollars of reinsurance capital."

Hirsh said that McKinsey worked "hand-in-glove" with the few Vesttoo employees involved in the letters of credit scheme, who used their positions within the company to screen the misconduct from the rest of the organization.

"Upon information and belief, McKinsey was motivated to unquestioningly push this narrative to ensure continued support for McKinsey’s profitable arrangement with Vesttoo," the complaint said.

"Much like the Vesttoo bad actors, McKinsey disregarded its legal duties to Vesttoo for personal gain."

McKinsey has absorbed significant fee losses from Vesttoo's scandal as of 2025, the company told The Insurer.