Insolvency orders and the appointment of Adv. Lior Dagan as the trustee of the EGFE corporations and the debtor’s assets
Court order for the opening of insolvency proceedings and the appointment of Adv. Lior Dagan as the trustee of EGFE Israel Ltd. (in liquidation) – Click here to download
Court order for the opening of insolvency proceedings and the appointment of Adv. Lior Dagan as the trustee of the debtor, Michael Ben Ari – Click here to download
Court order for the opening of insolvency proceedings and the appointment of Adv. Lior Dagan as the trustee of EGFE Hungary KFT (in liquidation) – Click here to download
Court order for the opening of insolvency proceedings and the appointment of Adv. Lior Dagan as the trustee of EGFE USA LLC (in liquidation) – Click here to download
Recognition order of the court in the Southern District of New York, USA, and the appointment of Adv. Lior Dagan as the foreign representative of the debtor – Click here to download
Table of contents
The Debtor and EGFE Corporations - Brief Background
The debtor, Michael Ben Ari (Greenfield) ran a fraudulent investment consulting business for many years (starting in 2007 at the latest) through the company EGFE Israel Ltd. (in liquidation) (hereinafter: “EGFE Israel”) and other foreign corporations, mainly EGFE Hungary KFT (in liquidation) (hereinafter: “EGFE Hungary”) and EGFE USA LLC (in liquidation) (hereinafter: “EGFE USA”) (the three corporations will be referred to hereafter together as: “EGFE Corporations” or “EGFE”). The debtor was also a director, an authorized representor, and the controlling owner of the aforementioned EGFE corporations. Beginning at the end of 2006 – beginning of 2007 (at the latest), the debtor and the EGFE corporations raised funds from clients, and pretended to invest these funds on behalf of the clients in the Blue River fund, but in fact, never did so.
Instead, EGFE sent its clients monthly or quarterly account statements (hereinafter: “account statements”) showing fictitious commercial activity, fictitious investments in the Blue River Fund that were never made, and within the framework of which it reported fictitious profits, which were never actually generated. Every December 31 of every year, EGFE produced for each customer a fake bank statement of the JPMorgan Chase bank, which is an American bank, in which the fictitious balances held for each customer in the bank were presented to the customers – in fraudulent presentations.
In addition to raising funds from clients allegedly for the Blue River Fund, the debtor and EGFE corporations raised funds from clients for alleged investments in various ventures around the world. For example, funds were supposedly raised for Sharap Plus, Better Life, and other Israeli startups. moreover, funds were allegedly raised for the purpose of investing in the Prudential Fund (on a variety of kinds and affiliates – in Brazil, Luxembourg, the Cayman Islands, and the USA). In the last years before the publication of the fraud, a lot of money was allegedly raised for projects in the Balkans in general and in Montenegro in particular, mainly in the field of mining – the Bentonite, White Bauxite and Red Bauxite projects.
The debtor and the EGFE corporations actually engaged in mass fraud known as “Ponzi”, which was carried out in a systematic and sophisticated manner for over 15 years, in which the debtor stole, cheated, forged and defrauded thousands of investors over the years, during which debts totaling over 600 million NIS were created (including the fictitious profits).
Between the debtor and the EGFE corporations, there was a complete commingling of assets and funds, while the debtor was the sole party that made decisions in these corporations, including private withdrawals that he made in the amounts of tens of millions of NIS. The complete mixing of the assets and funds between the accounts and funds of the debtor and the accounts and funds of the EGFE corporations, as well as between the accounts and funds of the EGFE corporations among themselves make the debtor and the EGFE corporations a “single economic and business entity”, which was held, controlled and managed by the debtor.
It will be clarified that the described mixing of assets does not only deal with the funds allegedly raised for the Blue River Fund, but all the funds raised for any project were used in the mixing of the debtor and the EGFE corporations.
The Insolvency Proceedings of the Debtor and the EGFE Corporations
The ISA opened a criminal investigation against the debtor and the companies under his control for a series of criminal offenses under Israeli law, including fraud, false registration in corporate documents, obstruction of investigative procedures and money laundering offenses, according to the Law on the Prohibition of Money Laundering.
On April 6, 2021, the criminal investigation against the debtor was publicized, the debtor was arrested for questioning, and the news of the debtor’s arrest and the criminal investigation were widely published in the media. The debtor was released to house arrest under restrictive conditions, which included the deposit of his passports (Israeli and American), and a Prohibition to leave Israel was issued against him.
The debtor violated the restrictive conditions imposed on him, and did not attend further ISA investigation. At the beginning of May (on or around May 6, 2021), the debtor fled from Israel to Serbia (via Turkey), under a false identity and using a fake passport belonging to a person named Nachum Eisenstadt, a personal friend of the debtor, who admitted as part of a plea deal to the offenses of obstruction of justice, Violation of a legal provision together with offenses under the passport law for these acts.
On May 7, 2021, following the publication of the fraud and the escape of the debtor, a request was submitted on behalf of about 300 creditors for an order to open insolvency proceedings against EGFE Israel, and later a similar request was also submitted on behalf of the creditors against the debtor personally. On May 12, 2021, the honorable court issued an order to initiate proceedings against EGFE Israel, and on May 26, 2021, an order was issued to initiate proceedings against the debtor, and Adv. Lior Dagan was appointed as the trustee of EGFE Israel (in liquidation) and as trustee of the debtor’s assets (in insolvency).
Later, after many tests and investigations, and after the trustee came to the conclusion that the debtor’s business and EGFE corporations were conducted in a complete mix of assets (as detailed above), applications were submitted on behalf of the trustee for an order to open proceedings against EGFE Hungary and EGFE USA, and Adv. Dagan was appointed as the trustee of these companies.
The Purpose of the Insolvency Proceedings
The main objectives of the insolvency proceedings and the appointment of the trustee are [a partial and non-exhaustive list]:
2. Conducting investigations and inspections to find all funds and assets, including those that were transferred illegally, in the years preceding the insolvency proceedings or after the opening of the proceedings, to close associates and/or third parties and the return of those funds and assets to the creditors’ pool [usually by taking legal proceedings in Israel and abroad].