A US federal bankruptcy court in Manhattan on Thursday authorized a lawyer representing Israel to recover assets from a $150 million Ponzi scheme, run by the so-called “Israeli Madoff,” believed to be the worst such scam ever carried out in the Jewish state.
The ruling is against Michael Ben-Ari, also known as Michael Greenfield, an American Israeli accused of defrauding hundreds of people in both countries in a 15-year-long scam, according to the Seiden Law Group, which is representing Israeli court-appointed trustee Lior Dagan. Hebrew media have dubbed Ben-Ari “the Israeli Madoff.”
Israel arrested Ben-Ari in April. But he fled the country on someone else’s passport after a judge released him to house arrest after he posted a NIS 2 million ($625,000) bond, according to the Israel Securities Authority.
ISA is also investigating one of Ben-Ari’s friends and investors, Nahum Eisenstadt, on suspicion of providing Ben-Ari with his passport to help him escape.
Ben-Ari’s current location is unknown.
According to the ISA, Ben-Ari ran a 15-year-long Ponzi scheme in which he ensnared hundreds of American and Israeli victims and caused losses that may exceed $150 million through his investment company EGFE Israel Ltd.
ISA said he was wanted “on suspicion of violating the Israeli Joint Investment Trust Law, Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, the Penal Law and the Prohibition on Money Laundering Law.”
Thursday’s ruling grants broad powers to Dagan, who was appointed by an Israeli court, to recover assets in the United States that are identified as fruits of the alleged criminal enterprise.
“This is the largest Ponzi scheme ever carried out in Israel, with almost all the assets smuggled overseas,” lawyer Eitan Erez, who is also representing some 685 victims told the Ynet news site.
Erez and Dagan have traveled to several other nations, including Montenegro, in a bid to recoup the money, he said.
According to Ben-Ari’s profile on his EGFE site, he emigrated to Israel from the US in 1981 and held management positions in Bank Leumi and the Supersol supermarket chain before founding EGFE (Ever Green Fields Enterprises) in 1999.
A Ponzi Scheme usually offers investors high returns, but operates using money from new investors to pay older ones.
Bernie Madoff, the perpetrator of the largest private Ponzi scheme in history, died in a US prison in April.
A court-appointed trustee has recovered more than $13 billion of an estimated $17.5 billion that investors put into Madoff’s business. At the time of Madoff’s arrest, fake account statements were telling clients they had holdings worth $60 billion.
While Ben-Ari is accused of running Israel’s largest Ponzi scheme, the country was in recent years the center of the fraudulent binary options industry, which defrauded victims worldwide out of billions.
The fraudulent binary options industry flourished for over a decade, from 2007, until it was outlawed by the Knesset in 2017, as a direct result of The Times of Israel’s investigative reporting, which began with a March 2016 article entitled “The wolves of Tel Aviv: Israel’s vast, amoral binary options scam exposed.” Many of the Israeli firms have since relocated overseas and continued the scam.
Fraudulent binary options companies ostensibly offered customers worldwide a potentially profitable short-term investment. But in reality — through rigged trading platforms, refusal to pay out, and other ruses — these companies fleeced the vast majority of customers out of most or all of their money. The fraudulent salespeople routinely concealed where they were located, misrepresented what they were selling, and used false identities.
Israel has not prosecuted any of the thousands of employees of the binary options industry. The US Department of Justice has prosecuted several key individuals, notably including Lee Elbaz, the CEO of Yukom Communications Ltd. who was sentenced to 22 years in prison in 2019. Her bosses, Yossi Herzog and Kobi Cohen, have both been indicted, and are still at large.