A 35-year-old man who allegedly bilked Orthodox Jewish investors in Los Angeles and New Jersey out of $47 million and then fled to Israel has been charged by the US Securities and Exchange Commission with using the proceeds to fund a lavish lifestyle.
The SEC alleged in a lawsuit filed Thursday, Jan. 12, in US District Court that from December 2018 to January 2021, Yossi Engel induced at least 29 individuals to invest in his company, iWitness Tech, LLC by claiming their funds would be used to purchase and install security camera equipment.
Additionally, Engel also allegedly promised that investor funds would be used to purchase property in Israel that would be developed and sold.
"Both of these claims were false," the SEC said in the suit seeking sanctions and undisclosed civil penalties against Engel. "Rather than use investor money to purchase cameras or develop property, Engel misappropriated the funds by spending investor money for his personal benefit and making Ponzi-like payments to earlier investors in an attempt to keep the scheme going."
"Rather than use investor money to purchase cameras or develop property, Engel misappropriated the funds by spending investor money for his personal benefit and making Ponzi-like payments to earlier investors in an attempt to keep the scheme going."
SEC
How did Yossi Engel con the Los Angeles, New Jersey Orthodox Jews?
Engel cultivated a reputation in the Orthodox Jewish community as 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.
When investors asked Engel why he didn't obtain bank loans for iWitness at a lower interest rate, he allegedly replied that because he was from Israel, he did not have sufficient credit in the United States.
"This was false, and the reason Engel could not obtain bank financing was because his businesses were not real," states the suit.
Investors typically sent money to Engel and iWitness by wire or check. In some instances, Engel told investors to wire funds to another investor, who would provide them with payments, according to the SEC.
"Most iWitness investors did not question this flow of funds, but the ones who did were told that they needed to send money via the third party because the third party was capable of changing money in Israel at lower rates than the banks," the suit says. "This was another falsehood."
A group of investors allegedly was brought into the scheme by a person identified in the suit as "Individual A," who was unaware of the fraud and believed the investments would be beneficial to his friends.
Individual A, who ultimately lost more than $700,000 of his own money, is now repaying investors more than $5.7 million because of the guarantees that he signed with them, says the suit.
Beginning in December 2018, Engel allegedly represented to existing and potential investors that he needed capital to purchase cameras and other equipment for iWitness, and would pay their investment returns from installation fees.
He allegedly offered at least one investor multiple variations on this deal, for different camera installation jobs, with investments ranging from $50,000 to $180,000, and rates of return of 10% to 20%.
However, in reality, iWitness' camera installation business was never profitable and over five years worked on projects worth $10,000 to $20,000 for only 20 to 30 customers, says the suit.
The SEC alleges Engel also created an illusion of profitability by using investor funds to pay for office rent, cars and payroll.
"Engel's representations about iWitness' operations and the source of investor returns, and the appearance of iWitness as a profitable, ongoing business, were all material to investors' decisions to invest in iWitness," the suit says.
In April 2020, Engel allegedly began pitching a new investment scheme.
He allegedly told investors he had a special relationship with the mayor of Bnei Brak, a town in Israel with a high concentration of Orthodox residents, that enabled him to fast-track the development of units in apartment buildings that would be sold slightly below market, generating a quick profit.
In connection with this pitch, Engel sent investors and potential investors videos and pictures of an apartment building in Israel, a video of him sitting in the office of Bnei Brak's mayor, and copies of land registrar documents, the suit states.
However, Engel later admitted there were no investment properties and he knew the land investment scheme was "based on lies," the SEC said. The videos Engel sent investors were allegedly of apartments where he had once lived. Additionally, the video of Beni Brak's mayor, with whom he did not share a special relationship, was taken when he simply stopped by the mayor's office to say hello, the suit says.
Engel allegedly sent more than $2.5 million to currency exchangers in Israel, and he withdrew $861,000 in cash. Engel also spent $56,880 at casinos and to fly on private jets at least twice.
At the end of December 2020, his scheme collapsed. Engel, who had been urging investors to roll over their investments or agree to additional time for repayment, was unable to solicit additional investments to cover his obligations, and he fled the United States to Israel.
"After a flurry of emails in which he apologized for ruining people's lives due to his 'sickness,' he briefly returned and, during that time, he met with some investors who were attempting to salvage their losses," the suit said.
Engel eventually signed a notarized statement in February 2021 admitting to securities fraud, and participated in a recorded meeting with several investors a month later in which he admitted running a Ponzi scheme, said the SEC.
Engel told investors he would try to pay them back at that time, but has not returned to the United States, according to the suit.