A federal court judge late Thursday issued a temporary restraining order against reinsurance intermediary Vesttoo Ltd. freezing its assets in response to a petition by an Aon PLC unit that detailed some of the alleged fraud in transactions involving Vesttoo.

Vesttoo, which has been under fire since allegedly fraudulent letters of credit were discovered last month, worked with Aon unit White Rock Insurance (SAC) Ltd. on various intellectual property insurance deals that helped start-up companies secure loans based on intellectual property assets.

According to documents in White Rock Insurance (SAC) Ltd. v. Vesttoo Ltd., filed Thursday in U.S. District Court for the Southern District of New York, the Aon unit sought an injunction freezing Tel Aviv, Israel-based Vesttoo’s assets pending arbitration of its claims against the company “stemming from an apparent large-scale fraud scheme surrounding letters of credit (‘LOC’) provided by Vesttoo to collateralize reinsurance transactions facilitated by White Rock on behalf of its insurer clients.”

The Aon unit, a Bermuda-based segregated cell company, said in the court filing it is primarily a middleman in the deals, and its cells are used by insurers to access third-party capital through entities like Vesttoo. White Rock holds collateral for a reinsurance transaction in a specific cell.

Most of the transactions relate to Aon’s business with lenders considering investments in start-up companies with significant intellectual property assets that need funding, court papers say. Aon has been offering the coverage, backed by various insurers, since 2020. Vesttoo, which was founded in 2018, started collaborating with Aon at the end of 2021, the petition states.

“Recognizing that the value of IP assets may be fluid, Aon’s client lenders would obtain collateral protection insurance, which was subsequently reinsured by capital arranged by Vesttoo and through a segregated account created by White Rock to facilitate reinsurance transactions agreed to between client insurers and Vesttoo,” court papers say.

One of the insurers involved in the deal was London-based Chaucer Syndicates Ltd., according to court documents.

The court filing included an illustration of a typical transaction involving White Rock and Vesttoo.

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“Accordingly, under this structure, reinsurance coverage for an insurance provider is secured entirely by an ability to draw down on the LOCs presented by Vesttoo. But Vesttoo now admits that, unbeknownst to White Rock or Aon, an unknown number of the LOCs Vesttoo presented to White Rock and its clients were fraudulent,” court papers say.

The values the fraudulent LOCs represent could total billions of dollars, the petition states.

Problems began for Vesttoo last month when an insurer demanded payment in full under an LOC that was purportedly issued by China Construction Bank.

“The insurer’s request for payment was denied, and CCB informed the insurer’s counsel that the LOC was not issued by CCB and appeared to be fraudulent,” court papers say.

White Rock said it is seeking to protect its clients and will file for arbitration proceedings in Bermuda. Several Aon clients have started or are contemplating legal action against the brokerage.

“Without immediate injunctive relief from this Court, Vesttoo may empty its bank account prior to any adjudication,” the petition says.

In granting a temporary restraining order prior to a hearing on the petition later this month, Judge Paul A. Engelmayer barred Vesttoo from withdrawing funds in its bank accounts or disposing of other assets, except for $1 million needed to pay staff and other operational expenses.

The order also directed Truist Bank to freeze Vesttoo’s accounts.

A White Rock spokesman said in a statement: “Aon has initiated legal action against Vesttoo to uncover how the alleged fraud was perpetrated, determine who was involved, and pursue all available remedies. We will continue to take any action necessary to protect our clients, affiliates and firm, which are victims of the alleged fraud, and to expedite the process by which any parties involved are held accountable.”