TEL AVIV — The 2009 discovery of the Tamar gas field off the coast of Israel sparked a classic rush in which money poured in from all sides, stock prices soared, and fortunes were made overnight.
But this dash for gas may also have attracted investments from more dubious sources. Roughly two years after the Tamar discovery, Israeli's special police unit for fighting economic crime began receiving intelligence pointing to criminal organizations being involved in the gas and oil sector. Certain unsavory characters, it would seem, had gotten into the business of mediating and purchasing offshore and onshore drilling licenses.
An initial police investigation dubbed "Master of Illusions" centered on an illegal online gambling operation allegedly led by Roy Hayun. Police now believe Hayun may have used a mediation deal to launder gambling revenue by acquiring rights in an oil exploration license. He also purchased shares of a company called ILDC Energy, which holds licenses for two gas fields.
Four years of eavesdropping, investigations, searches, and monitoring of international transactions have unearthed an affair that left police and tax investigators, and even attorneys, puzzled by its breadth. The transactions they've been trailing involve not only organized crime, but also key figures in finance and energy, and even former soccer players. Overall, it is believed that millions of shekels worth of online gambling revenue was laundered through the Tel Aviv Stock Exchange and ended up in oil drilling operations off the Israeli coast.
Two weeks ago the state attorney's office informed some of the 12 people under investigation that it plans to file charges and eventually hold hearings.
From soccer pitch to oil deals
Hayun, 32, made his fortunes in the foreign exchange sector. In recent months he has been dividing his time between Israel and London. He is believed to be working today with other Israelis in England and Ireland. He was interrogated three years ago in a separate case related to suspicions over fraud in soccer, but after two years, the case was closed with no charges.
Roy Hayun — Photo: Mu Israel
In May 2013, police opened a new investigation against Hayun based on suspicions that he operated gambling websites involving dozens of millions of shekels. Hayun was then arrested, moments before he boarded a flight abroad, and held for two weeks. Among his belongings, police found a notebook with dozens of names of suspected gamblers and their debts.
Police also found evidence of Hayun's involvement in gas and oil deals. In one such deal, Hayun bought ILDC Energy shares for 3.7 million shekels ($940,000) in 2010 and later sold them for 17.6 million shekel (neary $4.5 million).
Investigators are more interested in the source of the money than the fantastic returns he received. Their suspicion is that Hayun bought the stocks as a way to launder money he'd earned from illegal activities. To pull off those kinds of deals, he needed three ingredients: a deal, a straw man and shell accounts.
Moshe Hershberg, an Australian businessman now residing in Israel, caught the investigators' attention. He was familiar with the business of hydrocarbon explorations and, according to the draft indictment, was also a heavy gambler with debts to Hayun standing at nearly $500,000. He may, therefore, have been on the lookout for business opportunities that could help him mitigate his debts.
In late 2010, Hershberg found out that Lapidoth-Heletz, a firm that held 42.5% of the license for the onshore oil drilling company Sarit, was seeking to sell some of its exploration rights. Investigators believe he then approached Hayun and offered to broker a deal whereby the latter would buy the license and later resell it at a profit. In the process, Hershberg's brokerage fees would be deducted from his debt to Hayun.
Hershberg led the negotiations and signed all contracts — essentially acting as a straw man, presumably to hide Hayun's involvement. Shell accounts of a third party were also used in a bid to cover up any trace of the source of the funds. It is perhaps these accounts, at an exchange business that investigators visited while probing a separate case, that raised some flags.
Hershberg's attorney, Micha Petman, describes his client as "a respected businessman" who is well known in his field. "In our opinion, he has not done a single thing to breach the law, and he is convinced that at the end of the day it will turn out he committed no offenses or actions to enable others to commit offences," Petman said.
Jacob Luxenburg, who owns Lapidoth-Heletz, said he wasn't familiar with the details of this case. "We sold 10% of the Sarit license. For us, it was an ordinary deal. I was summoned by the police to talk about the details."
It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money but the simplest of errors exposed the scam and limited the damage to investors.
PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.
Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.
Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.
Share capital of one billion
The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).
The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.
Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.
While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.
The infamous typo that brought the Air Next scam down
Raising Initial Coin Offering
Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.
For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."
What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".
Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.
Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.
Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.
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