US Investors Sue Israeli Real Estate Promoter for $1 Million Over Alleged Fraud
Sixteen real estate investors in the United States are suing Israeli promoter Yair Paz for NIS 3.7 million (approximately $1 million), alleging significant irregularities in his business operations and a failure to return their funds. The lawsuit, filed in the Tel Aviv District Court, targets Paz, who markets himself as a leading Israeli real estate entrepreneur specializing in guiding investments in the U.S.
According to the claim, Paz raised funds from hundreds of Israelis over the past decade for U.S. property acquisitions, renovations, rentals, and sales. The plaintiffs assert that most of these investors did not meet the definition of "accredited investors." They also point out that in 2018, Paz admitted to offering securities without a prospectus and was fined NIS 180,000 by the Israel Securities Authority, a fact they claim was not disclosed to them at the time.
The investment mechanism described involves investors' funds being pooled into a dedicated corporation, with investors receiving "participation units" representing their share. Paz allegedly retained exclusive control over management, information, and cash flow, with investors having no direct claim to any property. Their entitlement was limited to a proportional share of operational profits and sale proceeds, with Paz solely responsible for calculations, reporting, collections, bank accounts, and decisions on profit distribution.
Instead of consolidated, verifiable reports, the plaintiffs claim they received thousands of scattered pages, copies of checks without revised statements, and partial reports from management companies. They allege Paz's operations involved self-dealing through transactions with other entities he controlled, granting exclusive management and sales rights to his chosen company, selling properties at prices significantly below market value only for them to be resold at much higher prices shortly after, disappearing assets from reports, and failing to report actual sales.
Since 2022, following what was presented as a total asset sale or "exit," investor payouts have reportedly ceased almost entirely. Funds returned were allegedly classified by Paz as "capital reduction" rather than profit, a classification that benefits him and reduces his liability, without proper documentation. Paz himself has acknowledged outstanding balances requiring repayment, evidenced by emails, settlement offers involving payment plans, and personal checks, but these arrangements were reportedly not honored, and Paz allegedly became unreachable or uncooperative.
The lawsuit contends that Paz systematically created a situation where each investor was left with a relatively small balance, making individual legal action costly and unlikely to yield returns. This allegedly resulted in substantial sums remaining in Paz's possession. The plaintiffs state they lack knowledge regarding the actual scope of assets purchased with their money, purchase prices, sellers, revenues, expenses, sale details, fees collected, fund diversions, and their precise entitlement.
