Mystery Surrounds Failed Multimillion Dollar Investment Fund

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Shlomo Maoz.Credit: Eyal Toueg

“I saved up 100,000 shekels ($34,600) that I was going to use to buy a home,” says G., 23, describing his decision to entrust his savings to an Israeli investment whose operations were frozen last week. Businessman Hilik Tapiro is thought to be behind the fund, called Keren Or.

“A person I know in the financial markets recommended” investing with Tapiro’s fund, G. said, adding, “I read about him on the Internet and felt he was a well-known name. Now everything’s blown up in my face. I spoke [last week] with Tapiro’s company and they told me, ‘Either the Securities Authority will let us work or we’ll be forced to disband the company.’”

G. is not alone. It's estimated that hundreds of people were tempted by advertisements guaranteeing returns of 8.5% after one year and 23% over two years, enabling Keren Or to raise some 150 million shekels. The ads featured Shlomo Maoz, an economist who is frequently in the public eye for his harsh attacks on Israel’s Ashkenazi establishment and who was described as the Tapiro Group’s chief economist.

A retiree who says he hoped to earn more than the flat interest rates offered by the banks invested 120,000 shekels with Keren Or. “The ads had Shlomo Maoz and he seems like a serious person,” said D., who, like G. asked for anonymity here. “I didn’t think something like this could ever happen. Maybe it’s because I belong to an older, more naive generation.”

Keren Or’s investors learned late last week that the Israel Securities Authority had ordered the fund’s manager to cease all operations, including interest payments to investors, leaving them anxious about the future of their investments.

“We’ve gathered a multidisciplinary team of experts to investigate and address the issue and its implications,” said a message posted on the fund’s website last week.

A group of around 30 individuals last week petitioned the Haifa District Court to appoint a temporary receiver for T.B. Advance Financing, the fund’s legal name.

Part of the Tapiro Group, whose holdings include a retirement insurance agency and a number of construction companies, Keren Or was established in late 2012. It says it raised 150 million shekels through aggressive marketing by 25 sales agents.

Sources in the company said Keren Or also relied heavily on word-of-mouth advertising, often on the part of insurance agents who brought it family members.

‘Yields like this’

The ads, featuring Maoz, promised outsized profits. “Yields like this aren’t just for the rich — you can enjoy them too!” “Do you want to invest and profit like the wealthy? Now you too can have the same opportunities to invest and enjoy high returns.”

But since news of Keren Or’s problems emerged, key figures purportedly connected with the fund denied any knowledge of it.

Although he appeared prominently in Keren Or’s ads, Maoz, speaking through his attorney, denied any connection to the fund or the advertising. But sources close to the fund, speaking on condition of anonymity, insisted that Maoz had provided fund managers with leads for potential investors.

Attorney Amir Birman, who was thought to be a partner with Tapiro in the closely held company, similarly denied any connection with T.B. Advance Financing. Birman issued a statement denying news reports about his connection, saying he only learned of the fund’s existence about a month ago. Ultimately, Birman’s statement said, it will be clear that he had no connection with the entire matter.

An anonymous source close to the company said the sales agents knew nothing about where the money they raised was being invested. “At the beginning they would have weekly meetings of the sales agents with Tapiro, divvying up bonuses and premiums to the top sellers, and prodding those who weren’t raising enough money,” the source said. “But no one ever knew where the money was being invested or could point to any real estate project the company was involved in.”

As it turns out, Keren Or was putting investors’ money into National Master Plan 38 projects, in which older apartment buildings are renovated and reinforced against earthquakes. The costs are borne by a developer, who in exchange for the improvements adds additional apartments that can then be sold at a profit.

“[Keren Or] was born out of the changing needs of the market and is helping distribute and manage risks in a low-interest environment and the uncertainty prevailing in capital markets around the world,” Tapiro told TheMarker in an interview earlier this year, after most of the money had been raised.

“We are offering investors a solid investment alternative and are making it an important component in the strategy of distributing risks in every investment portfolio. The National Master Plan 38 field presents particularly high potential returns.”

An associate of Tapiro’s said last week that some of the National Master Plan 38 projects were in Haifa’s Hadar neighborhood, which seems surprising: Haifa was a hub of such projects last year, but fewer than five were in Hadar. One developer decided against implementing the government earthquake-proofing program in the neighborhood, after concluding that it would not be profitable.


Last Thursday, the Haifa District Court ordered the fund to suspend its operations and appointed attorneys Rami Kogan and Lior Mazor as temporary receivers.

The court instructed Kogan and Mazor to review Keren Or’s transactions and ensure that no one absconds with the company’s assets.

According to their contracts with the fund, investors made loans to Keren Or, for which they were to receive monthly interest payments.

In a letter sent to investors last week, company counsel Shalom Goldblatt said Keren Or owed 52 million shekels in unpaid loans at the time of its suspension. The company has repaid some 30 million shekels in principal and interest, meaning it had raised just over 80 million shekels. But early this year, after the fund had already raised most of its money, Tapiro was quoted in TheMarker as saying that he and his colleagues had 150 million shekels.

Judge Adi Zarnakin also addressed the issue of Birman’s purported involvement in the operation, saying, “I order attorney Birman, who as I understood until recently had an ownership interest in the company, to cooperate with the temporary receivers and provide them with any information they request.”

One investor, who agreed to be identified as Ya’akov, told the court last Thursday that he couldn’t look his family in the eyes after endangering their savings by investing in the fund. He asked the court to return their initial investments, even without interest payments.

The documents filed in court show that the Tapiro Group bought three construction companies for 42 million shekels, to lay the groundwork for the venture.

One of the companies, Uffizi, had unrelated problems before it was acquired by the Tapiro Group. Now known as Final Touch, four years ago the company was a subcontractor for the renovation of Tel Aviv’s Habima National Theater. During construction, a professional opinion submitted to the city suggested that a balcony in one of the auditoriums was in danger of collapsing, prompting the theater to end its relationship with Uffizi. Some months ago the Tapiro Group bought it for 4.5 million shekels and renamed it.

According to the Tapiro Group, it snapped up Segalowitz Earthmoving & Development Works for 5.5 million shekels after the company ran into severe financial problem. The group bought another financially strapped firm, Amir Shehada Building & Development, several months ago for 2 million shekels.

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