Suspect in NIS 25 million scam turns self in

The owner of a central Israel investment company suspected of having swindled customers out of NIS 25 million was remanded for seven days in the Tel Aviv Magistrate’s Court on Thursday, one day after he turned himself in to police custody.

Eran Mizrahi reportedly promised his clients returns of 1-1.5% on their investment and then disappeared when the money did not materialize, in a scheme some victims have compared to Bernard Madoff’s investment scam.

The fraud division of the police searched several days for Mizrahi, who they believed had fled his Savyon home after he accumulated large debts to his investors. Mizrahi’s attorneys claim that he merely spent a few nights out of his house due to threats against him and his family. In response to the police request that the remand be extended 15 days, Mizrahi’s attorneys emphasized that having given himself up, Mizrahi demonstrated that he has no intention of escape.

Calling the case “a complicated affair,” Judge Ido Druyan did not accept Mizrahi’s argument and claimed that with the astronomical sum of money being investigated, he cannot rule out the possibility that Mizrahi would indeed attempt to flee. The charges being filed include fraud, money laundering and forgery.

On Wednesday, Joseph Mizrahi, the suspect’s father, was arrested in connection with the affair, and subsequently released to house arrest.

On Thursday morning, Zion Levy and Daniel Idelson, two of Mizrahi’s alleged victims, filed a petition requesting that Mizrahi be declared bankrupt by the court and that a receiver be appointed to oversee Mizrahi’s assets. According to the petition, Mizrahi introduced himself to them in 2009 as the manager of “Eran Mizrahi Investments and Finance Ltd.” and later changed the name to “Citadel Finance and investment Ltd.” Mizrahi convinced the two to invest their money with him, promising no substantial risk and the potential to reap monthly returns of at least 1-1.5%. Mizrahi told the investors that he had opened a trustee account at Bank Hapoalim in Givatayim where they should deposit their money.

Referring to the case as “very reminiscent of the exploits of the international swindler Bernard Madoff,” the petitioners said that Mizrahi told them that he personally guaranteed their money.

According to Levy and Idelson, Mizrahi said that he had also opened a trustee account at a Swiss bank, Heritage Bank. He explained that Heritage Bank was investing the money from the account in Givatayim before transferring it back into the account with returns.

Furthermore, the petitioners claim that Mizrahi promised that with a 30-day notice, they could withdraw any or all of their money at any time.

In August 2009 Levy invested money with Mizrahi, as did Idelson in December 2010. In November 2011, the two approached Mizrahi asking to withdraw from their accounts, and rather than their money, the two received excuses about “cash flow” difficulties. The stories continued for several months until March 2012, when Mizrahi, according to the petition, “disappeared off the face of the earth” without having enabled the withdrawals.

All attempts to contact Mizrahi by email, phone, in his home and office, were fruitless, according to the petitioners.