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A precedent decision was rendered by the Israeli District Court in the insolvency proceedings of Mike Ben Ari, (The Debtor), who is accused of committing the largest incidence of investor fraud ever seen in Israel, amounting to hundreds of millions of shekels.
The Debtor solicited money from investors by promising them a guaranteed return, but in reality, he did not invest the money in the fund as promised. This type of fraud is better known as a Ponzi scheme.
The Trustee, Adv. Lior Dagan, along with Adv. Dvori Biton Zini from our Insolvency department, filed a motion for prior approval of a unique mechanism for resolving the debt claims of over 1,000 investors who were victims of the scam.
The motion was based on the manner of approving debt claims in Ponzi schemes as it was applied in the Madoff case in the US and in similar cases.
The court was asked to confirm that fictitious profits will not be paid to investors and to approve proposed guidelines for examining other elements of the debt claims.
The mechanism approved by the court aims to promote principles of equality and distributive justice among various groups of investors, including those who received a significant return on their investment during the period they invested with the debtor, those who received a small return, and those who did not receive any return.
Approval of this mechanism in advance will aid in promoting a quick distribution of dividends in this complex case involving multiple creditors.
