A 35-year-old man who allegedly extorted $47 million from Orthodox Jewish investors in Los Angeles and New Jersey and then fled to Israel has been accused by the US Securities and Exchange Commission of using the proceeds to fund a lavish lifestyle.
The SEC, in a lawsuit filed in U.S. District Court on Thursday, January 12, alleged that Yossi Engel induced at least 29 people to invest in his company iWitness Tech, LLC from December 2018 to January 2021 by alleging that their funds would be used to purchase and install surveillance camera equipment.
In addition, Engel also allegedly promised that investor funds would be used to purchase properties in Israel, which would be developed and sold.
“Both allegations were false,” the SEC said in the lawsuit, which sought sanctions and undisclosed civil penalties against Engel. “Rather than using investor funds to buy cameras or develop real estate, Engel embezzled the funds by using investor funds for personal gain and making snowball-like payments to previous investors to keep the program afloat.”
Engel cultivated a reputation in the Orthodox Jewish community for being trustworthy, charismatic, and generous. According to the SEC, he opened a small synagogue in a room next to his iWitness office, where he taught from the Torah, which is the compilation of the first five books of the Hebrew Bible.
“However, Engel used the goodwill he generated through his community activities to participate in a fraudulent securities offering scheme,” the lawsuit states.
When asked by investors why he couldn’t get bank loans at a lower interest rate for iWitness, Engel reportedly replied that he didn’t have sufficient credit in the US because he was from Israel.
“That was false, and the reason Engel couldn’t get bank financing was because his deals weren’t genuine,” the lawsuit states.
Investors typically sent money to Engel and iWitness via wire transfer or check. In some cases, Engel asked investors to transfer funds to another investor who would make payments to them, according to the SEC.
“Most iWitness investors did not question this cash flow, but those who did were told that they had to send money through the third party because the third party was able to get money in Israel at lower rates than the banks to switch,” the lawsuit says. “That was another untruth.”
A group of investors were allegedly brought into the system by a person identified in the lawsuit as “Individual A,” who was unaware of the fraud and believed the investments would be beneficial to her friends.
Person A, who ultimately lost more than $700,000 of his own money, is now repaying investors more than $5.7 million as a result of the guarantees he signed with them, the lawsuit says.
As of December 2018, Engel reportedly claimed to existing and potential investors that he needed capital to purchase cameras and other equipment for iWitness and would pay their return on investment from installation fees.
He allegedly offered at least one investor multiple variations of this deal for various camera installation jobs with investments ranging from $50,000 to $180,000 and yields of 10% to 20%.
In reality, however, iWitness’s camera installation business was never profitable and has worked on projects ranging from $10,000 to $20,000 for just 20 to 30 clients for over five years, the lawsuit says.
The SEC alleges Engel also created an illusion of profitability by using investor money to pay for office rent, cars, and payroll.
“Engel’s accounts of iWitness’s business and the source of investor returns, as well as iWitness’s image as a profitable, operating company were all integral to investors’ decision to invest in iWitness,” the lawsuit reads.
In April 2020, Engel reportedly began presenting a new investment plan.
He allegedly told investors he had a special relationship with the mayor of Bnei Brak, a city in Israel with a high concentration of Orthodox residents, that allowed him to accelerate development of residential units that were selling slightly below market price. make a quick profit.
In connection with that pitch, Engel sent investors and potential investors videos and pictures of an apartment building in Israel, a video of him sitting in the mayor’s office of Bnei Brak, and copies of land titles, the lawsuit says.
However, Engel later admitted that there were no investment properties and he knew the land investment program was “based on lies,” the SEC said. The videos Engel sent to investors were allegedly about apartments where he once lived. In addition, video of the mayor of Beni Brak, with whom he had no special relationship, was captured simply stopping by the mayor’s office to say hello, the lawsuit states.
Engel reportedly sent more than $2.5 million to currency exchangers in Israel and withdrew $861,000 in cash. Engel also spent $56,880 at casinos and flew private jets at least twice.
At the end of December 2020, his plan collapsed. Engel, who had urged investors to extend their investments or agree to an additional payback period, was unable to solicit additional investments to meet his obligations and fled the United States for Israel.
“After a spate of emails apologizing for ruining people’s lives because of his ‘illness’, he returned briefly and during that time met with some investors who were trying to salvage their losses ‘ the lawsuit says.
Engel eventually signed a notarized statement in February 2021 admitting to securities fraud and a month later attended a taped meeting with multiple investors where he admitted to operating a pyramid scheme, the SEC said.
Engel told investors he would attempt to repay them at that time, but has not returned to the United States, according to the lawsuit.
https://www.ocregister.com/2023/01/13/la-man-swindled-47-million-from-orthodox-jews-in-ponzi-scheme-sec-alleges/ LA man scammed $47 million from Orthodox Jews in Ponzi scheme, claims SEC – Orange County Register