The Biggest Ponzi Scheme Carried Out in Israel

The Biggest Ponzi Scheme Carried Out in Israel

Ponzi schemes have been around for centuries. Even before this name was coined. These scams are pyramid schemes. Sometimes, they revolve around investments. Other times, they involve marketing scams. However, the system is always the same. 

The scammers promise money. It can either be in the form of profits or payment for services. To access the money, people must support their business idea. If we’re talking about an investment opportunity, this means investing. If the scam is a marketing pyramid system – selling or promoting products. The whole purpose is to feed the system. To do so, contributors work for or invest in it. 

However, there’s more to it. The most valuable supporters bring in recruits. Thus, they expand the system. These new recruits are at the base of the pyramid. Hence, they only contribute for a while without gaining money or perks. Theoretically, these come later. But since the whole scheme is a fraud, sometimes they don’t.

The Ponzi scheme got its name from Charles Ponzi. He was an Italo-American investor. Ponzi convinced people to invest money in a foreign coupon’s strategy. He promised them huge and quick returns. The first investors enjoyed profits. This is because Charles paid them from new investors’ money. He went like this for two decades, making profits of millions. The system collapsed when many investors asked for their money back.

This is the typical end for a Ponzi or pyramid scheme. Something similar occurred recently in Israel. Learn more about the biggest Israel Ponzi scheme. 

Who Carried out the Biggest Ponzi Scheme in Israel? 

Let’s start with an essential detail – the profit. This massive scam generated more than $150 million. Another essential aspect? The nature of the fraud. The biggest Ponzi scheme in Israel was an investment scam. The nations involved? America and Israel. 

The whole scheme relied on an investment company. More or less, this was a copy of Charles Ponzi’s idea. However, other more recent cases like Bernie Madoff’s might have inspired the author. The company we’re referring to is EGFE Israel Ltd. The company owner was Michael David Greenfield, aka Michael Ben-Ari or the Israeli Madoff. He was the scam orchestrator and the person the authorities targeted. The US federal bankruptcy court handled the case. It issued an order for a lawyer in Israel to recover investors’ money. 

Greenfield set up a business site. This is how he promoted his company. On the website, he made several claims. He said he had been a manager at Bank Leumi. This is the second-largest bank in Israel. Therefore, investors were more tempted by his offer. Moreover, Michael Ben-Ari also said he worked for Supersol. This is the second-biggest supermarket chain in the country. The jobs he talked about were management positions. 

Fraudulent investment scams often rely on similar tricks. Con artists impersonate someone else. Alternatively, they make exaggerated or fake claims. All these boost investors’ trust and willingness to participate. 

Related article: Preventing Financial Exploitation and Scams Data: Stratford Management Press Release

What Were the Consequences? 

Authorities started investigating the case as it involved hundreds of victims. Both Israeli and American investors lost money. Moreover, the scam lasted for almost 15 years. This is another aspect that makes it resemble Charles Ponzi’s pyramid scheme. The latter conned people for approximately 20 years. 

According to a lawyer handling the case on behalf of almost 700 victims, it was the largest Ponzi scheme in the country. Furthermore, the con artist smuggled most of the illicit gains overseas. Therefore, investigators spent some time recovering the money. Lawyers from the US Seiden Law Group represented some of the victims. They’ve made considerable efforts to recover the missing funds.

As for Greenfield, authorities arrested him in April 2021. The Israel Securities Authority (ISA) brought him to justice. Nonetheless, things didn’t go smoothly, as it often happens in fraud cases. The author can’t be immediately sent to prison. Investigations are lengthy. So, the legal process also takes some time. And many fraudsters take advantage of this time. 

Greenfield was released soon after his arrest. As per a judge’s decision, he got house arrest instead. This, after paying a $625,000 bail. Greenfield profited from this context. He fled the country with a fake passport. At the moment, both authorities in the US and Israel are looking for him. If caught, he will answer to several charges. Violating the Penal Law and the Prohibition on Money Laundering Law are among them. 

Final Thoughts 

A Ponzi scheme is a scam relying on a pyramid structure. The purpose is to get as many recruits as possible. In the case of investment Ponzi schemes, the recruits are new investors. These are necessary to make the system sustainable. The more new investors join the scheme, the better. Older investors get paid from the contributions of new ones. And so, the system can proliferate. This is the pattern the biggest Ponzi scheme in Israel relied on. Take a look at Stratford Management Japan.