Securities Authority uncovers alleged Utrade fraud

Aviv Talmor

Israeli company Utrade used money from new investors to pay back old ones Ponzi-style, and reported fictitious balances.

The Israel Securities Authority has published a severely critical report on Utrade, controlled by Aviv Talmor. The report exposes an alleged Ponzi scheme - the use of money from new investors to repay previous investors seeking to withdraw their money - and false recording of the company's monetary balance.

The report shows that while Utrade's books report a $12 million (NIS 46.4 million) balance in money from the company's investors, the company's bank account contains only NIS 300 million - less than 1% of its debt.

A court has ordered Utrade to terminate its activity.

There are currently 350 investors in Utrade, of whom 40 have asked for their money, and are in a payment rescheduling arrangement with the company. The other investors are completely unaware that the company lacks the money to repay them in the event that they seek to withdraw their money.

During the probe of the company conducted by the Securities Authority, Utrade CFO Sami Sassoun confirmed that Utrade owed $12 million to its investors, and had a positive balance of only NIS 300,000. It appears that the reports sent by the company to its investors reported it had an accumulated credit balance of NIS 48 million. Sassoun said he did not know where the $12 million in investors' money disappeared to. He stated that he had begun working at Utrade only in September 2015, when the company account had NIS 150,000. Asked by the Securities Authority audit team whether money from overseas was due to Utrade, Sassoun answered that no one owed the company money.

"Globes" exposed Utrade's misdeeds in a series of investigative stories published in recent months by reporter Sapir Kalfon. "Globes" obtained dozens of complaints by the company's victims that the company was delaying payments to investors seeking to withdraw the balance of their investments, after losing most of their money. Up until yesterday, however, the company continued its undisturbed recruitment of new investors. Yesterday, following an audit conducted at the company offices that revealed documents and evidence showing its desperate situation, the Securities Authority petitioned the Tel Aviv District Court to halt the company's business, and an injunction enjoining the company from recruiting investors was issued.

In effect, money from the new investors in recent months was used to pay the old investors, and groundless fictitious positive balances were reported to the investors. The probe also revealed that the company controlling shareholder had been aware of its situation for several months. Sassoun told the Securities Authority that in recent months, he had spoken a number of times with Talmor about the situation, and warned him about what was being done.

Published by Globes [online], Israel business news - www.globes-online.com - on December 22, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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