2023-01-12 sec-litreleases complaint 235 KB 26,510 chars

SEC v. YOSSI ENGEL, No. 2:23-cv-00213, Central District of California (Jan. 12, 2023) — Complaint

raw: 20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§

20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§, No. 2:23-cv-00213 (Jan. 12, 2023)

Caption: Securities and Exchange Commission v. Yossi Engel

summary

Yossi Engel orchestrated a $47 million affinity fraud targeting the Orthodox Jewish community through iWitness Tech, LLC, and has since fled to Israel.

paragraph

The SEC filed a complaint against Yossi Engel for orchestrating a $47 million securities fraud targeting members of the Orthodox Jewish community in Los Angeles and New Jersey. Engel falsely claimed investor funds would be used for security camera installations and Israeli property development, but instead misappropriated the money for personal use and Ponzi-like payments. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties for violations of federal securities laws.

narrative

Between December 2018 and January 2021, Yossi Engel used his company, iWitness Tech, LLC, to perpetrate a $47 million affinity fraud targeting the Orthodox Jewish community. Engel leveraged his reputation as a community member to solicit investments ranging from $15,000 to $1.3 million, falsely promising high returns from security camera installations and real estate development in Israel. Instead of funding these ventures, Engel misappropriated investor funds for personal benefit and used the money to make Ponzi-like payments to earlier investors. The SEC alleges violations of the Securities Act and the Exchange Act, seeking permanent injunctions, disgorgement, and civil penalties. Following the collapse of the scheme, Engel fled the United States for Israel in March 2021.

Enriched metadata

Scheme: affinity-fraud (100%)
Court: Central District of California
Case No.: 2:23-cv-00213
Victim loss: $180,000
Entity: Yossi Engel

Classified affinity-fraud(confidence 100%). EDGAR detection: forms Form D· recall 58% / precision 2%. detection rule →

Extracted insights

Dollar amounts 14

$47.00M $47 million $10M–$100M
$47.00M $47 million $10M–$100M
$5.92M $5,918,976 $1M–$10M
$5.70M $5.7 million $1M–$10M
$2.50M $2.5 million $1M–$10M
$1.30M $1.3 million $1M–$10M
$861K $861,000 $100K–$1M
$700K $700,000 $100K–$1M
$180K $180,000 $100K–$1M
$57K $56,880 $10K–$100K
$50K $50,000 $10K–$100K
$20K $20,000 $10K–$100K

Entities 8

person fraudulent securities offering
person investor funds
organization iWitness Tech, LLC
agency Securities and Exchange Commission
organization Securities and Exchange Commission
location United States
organization United States
person yossi engel

Triples 8

Daniel Blau Is An Attorney For Securities And Exchange Commission
Tamar Braz Is An Attorney For Securities And Exchange Commission
Securities And Exchange Commission Alleges Defendant Yossi Engel Committed Fraudulent Securities Offering
Defendant Yossi Engel Used His Company Iwitness Tech, Llc
Iwitness Tech, Llc Targeted Members Of The Orthodox Jewish Communities In Los Angeles And New Jersey
Defendant Yossi Engel Raised Funds From At Least 29 Defrauded Investors Across The Country
Defendant Yossi Engel Fled The United States To Israel In March 2021
Iwitness Tech, Llc Was Formed By Yossi Engel In 2018

PDF

20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ · Source

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Extracted body text (26,510c)

COMPLAINT
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Daniel Blau (Cal. Bar No. 305008)
Email: [email protected]
Tamar Braz (Cal. Bar No. 264080)
Email: [email protected]

Attorneys for Plaintiff
Securities and Exchange Commission
Michele Wein Layne, Regional Director
Alka N. Patel, Associate Regional Director
Gary Y. Leung, Regional Trial Counsel
444 S. Flower Street, Suite 900
Los Angeles, California 90071
Telephone: (323) 965-3306
Facsimile: (213) 443-1904
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Western Division
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

vs.
YOSSI ENGEL,
Defendant.

Case No. 2:23-cv-00213

COMPLAINT

Plaintiff Securities and Exchange Commission (“SEC”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to Sections 20(b),
20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§
77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),
78u(d)(3)(A), 78u(e) & 78aa(a).
2. Defendant has, directly or indirectly, made use of the means or
instrumentalities of interstate commerce, of the mails, or of the facilities of a national

COMPLAINT
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securities exchange in connection with the transactions, acts, practices and courses of
business alleged in this complaint.
3. Venue is proper in this district pursuant to Section 22(a) of the Securities
Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a),
because certain of the transactions, acts, practices and courses of conduct constituting
violations of the federal securities laws occurred within this district.
SUMMARY
4. Defendant Yossi Engel, through his company iWitness Tech, LLC
(“iWitness”), used his community ties to perpetrate a $47 million affinity fraud – a
fraudulent securities offering targeting members of the Orthodox Jewish communities
in Los Angeles and New Jersey – between December 2018 and January 2021.
5. Engel claimed to be seeking capital for a purported business that
installed security cameras in Los Angeles. In the first iteration of his scheme, Engel
induced members of the Orthodox community to invest by falsely telling them that he
would use their funds to purchase security camera equipment that he would later
install. In the second iteration of his scheme, he told investors that he would use their
funds to purchase property in Israel that he would then develop and sell. Both of these
claims were false: rather than use investor money to purchase cameras or develop
property, Engel misappropriated the funds by spending investor money for his
personal benefit and making Ponzi-like payments to earlier investors in an attempt to
keep the scheme going. In total, Engel raised at least $47 million from December
2018 to January 2021 from at least 29 defrauded investors across the country.
THE DEFENDANT
6. Defendant Yossi Engel, age 35 years old, is a former resident of Los
Angeles, California. Engel has never held any securities licenses, has never been
registered with the Commission in any capacity, and has no disciplinary history. In
March 2021, after his fraudulent securities scheme collapsed, Engel fled the United
States to Israel.

COMPLAINT
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THE ALLEGATIONS
A. Engel Defrauded iWitness Investors
1. Engel and iWitness
7. iWitness is a California limited liability company formed by Engel in
2018 with its principal place of business in Los Angeles, California.
8. Engel was the founder of iWitness. Throughout its existence, iWitness
was owned and controlled by Engel, and Engel was its sole member, chief executive
officer, and manager.
9. iWitness has never been registered with the Commission in any capacity
and has never registered any offering of its securities.
10. iWitness is now defunct: its registration with the California Secretary of
State is suspended, its bank accounts are closed, and its office is closed down.
11. iWitness purported to engage in the business of installing security
cameras.
12. Engel’s investors are members of the Orthodox Jewish community
primarily located in Los Angeles and New Jersey.
13. Engel was an active member of an Orthodox synagogue in Los Angeles.
He met investors through the synagogue as well as through introductions from other
members of the community.
14. Engel cultivated a reputation in the Orthodox Jewish community as a
studier of Torah and as a generous donor. He opened his own small synagogue in a
room next to his iWitness office, and spent time teaching Torah to others. iWitness
investors believed Engel to be trustworthy as well as charismatic.
15. Engel, however, exploited the goodwill he engendered through his
community activities to engage in a fraudulent securities offering scheme.
2. Engel’s Fraudulent Securities Offering and Solicitation of Investors
16. From at least December 2018 to January 2021 (two months before Engel
fled the United States), Engel offered investments in iWitness that ranged from

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$15,000 to $1.3 million in the form of short-term (from two weeks to six months)
loans that provided a high rate of return (between 10% and 60% annualized interest).
17. These investments were frequently memorialized as promissory notes
that Engel signed. The notes were also purportedly secured by an iWitness invoice
and accompanied by a Hebrew document called a Heter Iska that made the
investment legal under Jewish religious law.
18. Some iWitness investments were documented orally by Engel or over
text message.
19. Engel drafted all investment documentation, including iWitness
promissory notes and Heter Iska documents, drafted texts to investors, and had
ultimate authority over the representations made therein, including their content and
whether and how those statements were communicated to investors and potential
investors.
20. Whether memorialized orally, in an informal writing, or through a
promissory note, Engel represented to all iWitness investors that returns on their
investment would be obtained through his and iWitness’s security camera installation
business and/or land development efforts alleged below. All of the investors
understood that they were to receive profits from the efforts of others. The investors
understood that they risked the loss of their funds.
21. When investors asked Engel why he didn’t borrow money from the bank
at a lower rate of interest, he told them that, because he was from Israel, he did not
have sufficient credit in the United States.
22. On information and belief, this was false, and the reason Engel could not
obtain bank financing was because his businesses were not real.
23. Typically, investors sent money to Engel and iWitness by wire or by
check. But, in some instances, Engel told investors to wire funds to another investor.
Purported returns were also occasionally wired to investors via a wire from another
investor.

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24. Most iWitness investors did not question this flow of funds, but the ones
who did were told that they needed to send money via the third party because the
third party was capable of changing money in Israel at lower rates than the banks.
This was another falsehood.
25. Engel also lulled iWitness investors in various ways into being
comfortable investing with him: he offered to do the initial investment with a credit
card that contained fraud protection; he referred investors to others in the community
who had invested with him and purportedly successfully earned returns; and he
occasionally asked other members of the community to act as guarantors for the
investments.
26. A subset of investors were brought into the scheme by Individual A, who
had previously invested in Engel’s projects, was unaware of the fraud, and believed
the investments would be beneficial to his friends. Individual A acted as a go-
between with this subset of investors, who largely did not meet with Engel. Engel
provided all information regarding the investments to Individual A, who passed that
information along to this subset of investors. Individual A told these investors that
their investment would be used to fund Engel’s businesses, but that they could
characterize the investments as loans to Individual A that Individual A personally
guaranteed. These funds were sent directly to Engel and iWitness, and investors
understood that their money would be used to fund Engel’s camera installation or
property development projects. Individual A, who ultimately lost over $700,000 of
his own money, is now repaying these investors over $5.7 million because of the
guarantees that he signed.
3. Engel’s False and Misleading Statements About iWitness’s Business
27. From at least December 2018, Engel represented to investors and
potential investors that he needed capital to purchase cameras and other equipment
for his purported iWitness business. He further represented to investors and potential
investors that he would pay their investment returns from installation fees generated

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by iWitness’s security camera business.
28. As one example, at various times in 2018 and 2019, Engel told a
potential investor, both orally and via text, that he had a specific camera installation
job for which he needed to purchase equipment. Engel represented to the investor that
he “got a better deal” when he personally supplied the equipment, that he needed
funds to purchase that equipment, and that he would pay the investor his principal
and a return after iWitness was paid for the job. Over the course of 2018 and 2019,
Engel offered this investor multiple variations on this deal, for different camera
installation jobs, in varying amounts (approximately $50,000 to $180,000), with
varying terms (approximately 4 weeks to 6 weeks), and for varying rates of return
(approximately 10% to 20%). These and the other representations Engel made to
investors and potential investors about the nature of iWitness’s business and how
their investment returns would be generated were false.
29. In reality, iWitness’ camera installation business was never profitable.
30. Over the course of five years, iWitness only worked on projects worth a
total of approximately $10,000 to $20,000 for only 20 to 30 clients.
31. iWitness employees often performed no work for the installation
business.
32. On information and belief, Engel knew that iWitness’s camera
installation business was unprofitable. He used investor funds to pay for office rent,
cars, and payroll so as to maintain the appearance of a profitable, ongoing business.
When investors came to Engel’s office, they saw a physical office, employees, and
trucks.
33. Engel’s representations about iWitness’s operations and the source of
investor returns, and the appearance of iWitness as a profitable, ongoing business,
were all material to investors’ decisions to invest in iWitness.
4. Engel’s Land Development Scheme
34. On or around April 2020, Engel started pitching a different investment

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through iWitness. He started telling investors and potential investors that he was
developing property in Israel.
35. Specifically, Engel told investors and potential investors that he had a
special relationship with the mayor of Bnei Brak, a town in Israel with a high
concentration of Orthodox residents, and that this special relationship allowed him to
fast track the development of additional units in apartment buildings.
36. Engel further told investors and potential investors he would use investor
funds to purchase buildings in Bnei Brak, and then remodel the buildings to add
additional units, later selling the apartments slightly below market, which would lead
to a quick sale and generate a profit.
37. In connection with this pitch, Engel sent investors and potential investors
videos and pictures of an apartment building in Israel, a video of him sitting in the
office of the mayor of Bnei Brak (thereby demonstrating his special relationship),
copies of purported land registrar documents that showed ownership of the units, and
copies of alleged land registrar documents of other apartments he supposedly owned
which would act as collateral for the investments.
38. For example, on or around April 2020, Engel orally told an investor that
he had a big real estate project in Israel. Engel told the investor that he was buying
two one-story apartments on the top floor of a building because he had special
connections that would allow him to get a permit to build a floor on top of these units,
which would enable him to build an additional two units. He told the investor that he
would complete the project in seven or eight months, and that his plan was to sell the
building slightly under the market price, thereby allowing him to flip it quickly and
still make a reasonable return. He presented this investor with a contract, pictures of
the building and apartment, and the video of himself sitting with the mayor of Bnei
Brak.
39. In reality, as Engel later admitted, there were no such properties.
40. Engel knew that his land investment scheme was based on lies.

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41. The purported land registrar documents were fake.
42. The videos of the apartments were also fake; they were only videos of
apartments he used to live in, rather than properties iWitness planned to invest him.
43. The video of Engel with the mayor was a video of him simply saying
hello to the mayor of Bnei Brak, with whom he did not have a special relationship.
44. Engel’s representations to investors about his property investment
business were material to their decision to invest in iWitness.
5. Engel Misappropriated Investor Funds to Make Ponzi-Like Payments
45. In reality, Engel was running a Ponzi-like scheme. He used the money
he raised from investors to make purported profit distributions to earlier investors, or
to fund his lifestyle.
46. Engel used the investor funds, together with the funds from other
sources, to pay for the costs of his business (including rent, payroll, and cars). He also
used the funds to pay his personal rent and other living expenses, to make donations,
and to fund his synagogue. He sent over $2.5 million to currency exchangers in
Israel, and he withdrew over $861,000 in cash. He also used some of the money to
fund elements of a lavish lifestyle –he spent $56,880 at casinos and to fly on private
jets at least twice.
47. Excluding what Engel distributed to his investors in illegitimate Ponzi-
like payments, Engel directly received $5,918,976 in ill-gotten gains from investors.
B. Engel Offered and Sold Securities
48. The investment opportunities that Engel offered and sold are securities
as either notes or investment contracts.
1. The iWitness investments are securities because they are notes
49. Investors received documents styled as promissory notes that set forth
principal and interest payments, in addition to a religious document that rendered the
investments as legal under Jewish religious law.
50. Investors were primarily motivated by the generation of profits when

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investing in iWitness notes.
51. iWitness note investors reasonably expected that they were making an
investment.
52. There is no regulatory scheme or factor that significantly reduced the
risk of the iWitness investments, such that a court should not apply the federal
securities laws to Engel’s note offering.
2. The iWitness investments are securities because they are investment
contracts
53. iWitness investors transferred money to Engel and iWitness and they
risked the loss of those funds.
54. iWitness investor funds were pooled in iWitness’s and Engel’s bank
accounts.
55. iWitness investors were dependent on Engel to install cameras or
develop property in Israel in order to make an investment profit.
56. Engel’s fortunes were tied to those of his iWitness investors.
57. Engel promised significant returns to iWitness investors, who would
only receive those returns through Engel’s and iWitness’s efforts to buy camera
equipment and install it for a profit, or their efforts to buy, develop, build, and sell
properties in Israel at a profit.
58. Based on Engel’s representations about their investment, iWitness
investors reasonably believed that iWitness and Engel would perform all of the
services necessary to generate investment returns, and that iWitness and Engel were
wholly responsible for deriving those returns for entirely passive iWitness investors.
C. Engel’s Scienter and Unreasonable Conduct
59. At all relevant times, Engel acted with scienter, or at a minimum, was
deliberately and consciously reckless, and his unreasonable conduct was negligent.
60. Engel did, or directed, all of iWitness’s fundraising from investors.
61. Engel made all of the false and misleading statements communicated to

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investors that concerned their investments in iWitness.
62. Engel controlled iWitness’s bank accounts and directed all of the Ponzi-
like payments made by iWitness.
63. At the end of December 2020, Engel’s scheme collapsed. Engel, who
had been urging investors to roll over their investments or agree to additional time for
repayment, was unable to solicit additional investments to cover his obligations, and
he fled the United States.
64. After a flurry of emails in which he apologized for ruining people’s lives
due to his “sickness,” he briefly returned and, during that time, he met with some
investors who were attempting to salvage their losses.
65. Engel eventually signed a notarized statement on or around February 7,
2021, admitting to securities fraud, and he participated in a recorded meeting with
several investors on or around March 2021 in which he admitted that he was running
a Ponzi scheme.
66. During that meeting, Engel made a series of admissions regarding
iWitness’s fraudulent securities offering.
67. He admitted that iWitness’s security camera installation business was
never profitable.
68. He admitted that iWitness’s represented property development business
in Israel was a fiction because there were never any investment properties.
69. He admitted that the property deeds he had provided iWitness investors
were fake.
70. He admitted that the videos of the apartments he had provided iWitness
investors were just videos of apartments he had resided at in the past.
71. He admitted that the video of his meeting with Bnei Barak’s mayor was
simply a greeting and that he had no special relationship with the official.
72. Although Engel told investors that he would try to pay them back at that
time, he fled to Israel shortly thereafter and has not returned to the United States.

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FIRST CLAIM FOR RELIEF
Fraud in the Connection with the Purchase and Sale of Securities
Violations of Section 10(b) of the Exchange Act and Rule 10b-5
73. The SEC realleges and incorporates by reference paragraphs 1 through
72 above.
74. Engel engaged in a fraudulent scheme in which he raised over $47
million through the sale of securities by, among other things: telling investors that
iWitness would use the funds to purchase camera equipment or develop property,
when, in fact, the funds were used to make Ponzi-like distributions to other investors
and for Engel’s personal benefit; falsely representing to investors that iWitness had a
profitable and ongoing business of installing camera equipment; omitting to tell
investors that returns had been paid from new investor funds; telling investors that he
was borrowing from retail investors instead of banks because of insufficient credit
when, in fact, Engel was perpetrating a fraud; telling investors who received funds
from, or sent funds to, other investors that the reason for this flow of funds was to
reduce the costs of exchanging currencies when, in fact, the funds were Ponzi
distributions; providing investors with false documents that purported to show that
Engel owned properties in Israel as well as false documents that purported to show
that Engel owned properties that could serve as collateral; and providing investors
with pictures of apartments that he was going to develop when, in reality, the pictures
merely depicted pictures of an apartment he used to live in. Engel knew or was
reckless in not knowing that the above misstatements and omissions were false or
misleading.
75. By engaging in the conduct described above, Engel, directly or
indirectly, in connection with the purchase or sale of a security, by the use of means
or instrumentalities of interstate commerce, of the mails, or of the facilities of a
national securities exchange: (a) employed devices, schemes, or artifices to defraud;
(b) made untrue statements of a material fact or omitted to state a material fact

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necessary in order to make the statements made, in the light of the circumstances
under which they were made, not misleading; and (c) engaged in acts, practices, or
courses of business which operated or would operate as a fraud or deceit upon other
persons.
76. By engaging in the conduct described above, Engel violated, and unless
restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act,
15 U.S.C. § 78j(b), and Rules 10b-5(a), 10b-5(b), and 10b-5(c) thereunder, 17 C.F.R.
§§ 240.10b-5(a), 240.10b-5(b) & 240.10b-5(c).
SECOND CLAIM FOR RELIEF
Fraud in the Offer or Sale of Securities
Violations of Section 17(a) of the Securities Act
77. The SEC realleges and incorporates by reference paragraphs 1 through
72 above.
78. Engel engaged in a fraudulent scheme in which he raised over $47
million through the sale of securities by, among other things: telling investors that
iWitness would use the funds to purchase camera equipment or develop property,
when, in fact, the funds were used to make Ponzi-like distributions to other investors
and for Engel’s personal benefit; falsely representing to investors that iWitness had a
profitable and ongoing business of installing camera equipment; omitting to tell
investors that returns had been paid from new investor funds; telling investors that he
was borrowing from retail investors instead of banks because of insufficient credit
when, in fact, Engel was perpetrating a fraud; telling investors who received funds
from, or sent funds to, other investors that the reason for this flow of funds was to
reduce the costs of exchanging currencies when, in fact, the funds were Ponzi
distributions; providing investors with false documents that purported to show that
Engel owned properties in Israel as well as false documents that purported to show
that Engel owned properties that could serve as collateral; and providing investors
with pictures of apartments that he was going to develop when, in reality, the pictures

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merely depicted pictures of an apartment he used to live in. Engel knew or was
reckless in not knowing that the above misstatements and omissions were false or
misleading.
79. By engaging in the conduct described above, Engel, and each of them,
directly or indirectly, in the offer or sale of securities, and by the use of means or
instruments of transportation or communication in interstate commerce or by use of
the mails directly or indirectly: (a) employed devices, schemes, or artifices to
defraud; (b) obtained money or property by means of untrue statements of a material
fact or by omitting to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading; and
(c) engaged in transactions, practices, or courses of business which operated or would
operate as a fraud or deceit upon the purchaser.
80. By engaging in the conduct described above, Engel violated, and unless
restrained and enjoined will continue to violate, Sections 17(a)(1), 17(a)(2), and
17(a)(3) of the Securities Act, 15 U.S.C. §§ 77q(a)(1), 77q(a)(2), & 77q(a)(3).
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that Engel committed the alleged
violations.
II.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Yossi Engel, and his officers, agents,
servants, employees and attorneys, and those persons in active concert or
participation with any of them, who receive actual notice of the judgment by personal
service or otherwise, and each of them, from violating Section 17(a) of the Securities
Act [15 U.S.C. §77q(a)], and Section 10(b) of the Exchange Act [15 U.S.C. §§
78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

COMPLAINT
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III.
Order Engel to disgorge all funds received from his illegal conduct, together
with prejudgment interest thereon, pursuant to Sections 21(d)(5) and 21(d)(7) of the
Exchange Act [15 U.S.C. § 78u(d)(5) & 78u(d)(7)].
IV.
Order Engel to pay civil penalties under Section 20(d) of the Securities Act [15
U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].
V.
Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court.
VI.
Grant such other and further relief as this Court may determine to be just and
necessary.
Dated: January 12, 2023

/s/ Daniel Blau
Daniel Blau
Attorney for Plaintiff
Securities and Exchange Commission

OCR text (29,904c · tika · 95% conf)

COMPLAINT 1

Daniel Blau (Cal. Bar No. 305008)
Email: [email protected]
Tamar Braz (Cal. Bar No. 264080)
Email: [email protected]

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Western Division

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

vs.

YOSSI ENGEL,

Defendant.

Case No. 2:23-cv-00213

COMPLAINT

Plaintiff Securities and Exchange Commission (“SEC”) alleges:

JURISDICTION AND VENUE

1. The Court has jurisdiction over this action pursuant to Sections 20(b),

20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§

77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),

78u(d)(3)(A), 78u(e) & 78aa(a).

2. Defendant has, directly or indirectly, made use of the means or

instrumentalities of interstate commerce, of the mails, or of the facilities of a national

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 1 of 14 Page ID #:1

COMPLAINT 2

securities exchange in connection with the transactions, acts, practices and courses of

business alleged in this complaint.

3. Venue is proper in this district pursuant to Section 22(a) of the Securities

Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a),

because certain of the transactions, acts, practices and courses of conduct constituting

violations of the federal securities laws occurred within this district.

SUMMARY

4. Defendant Yossi Engel, through his company iWitness Tech, LLC

(“iWitness”), used his community ties to perpetrate a $47 million affinity fraud – a

fraudulent securities offering targeting members of the Orthodox Jewish communities

in Los Angeles and New Jersey – between December 2018 and January 2021.

5. Engel claimed to be seeking capital for a purported business that

installed security cameras in Los Angeles. In the first iteration of his scheme, Engel

induced members of the Orthodox community to invest by falsely telling them that he

would use their funds to purchase security camera equipment that he would later

install. In the second iteration of his scheme, he told investors that he would use their

funds to purchase property in Israel that he would then develop and sell. Both of these

claims were false: rather than use investor money to purchase cameras or develop

property, Engel misappropriated the funds by spending investor money for his

personal benefit and making Ponzi-like payments to earlier investors in an attempt to

keep the scheme going. In total, Engel raised at least $47 million from December

2018 to January 2021 from at least 29 defrauded investors across the country.

THE DEFENDANT

6. Defendant Yossi Engel, age 35 years old, is a former resident of Los

Angeles, California. Engel has never held any securities licenses, has never been

registered with the Commission in any capacity, and has no disciplinary history. In

March 2021, after his fraudulent securities scheme collapsed, Engel fled the United

States to Israel.

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 2 of 14 Page ID #:2

COMPLAINT 3

THE ALLEGATIONS

A. Engel Defrauded iWitness Investors

1. Engel and iWitness

7. iWitness is a California limited liability company formed by Engel in

2018 with its principal place of business in Los Angeles, California.

8. Engel was the founder of iWitness. Throughout its existence, iWitness

was owned and controlled by Engel, and Engel was its sole member, chief executive

officer, and manager.

9. iWitness has never been registered with the Commission in any capacity

and has never registered any offering of its securities.

10. iWitness is now defunct: its registration with the California Secretary of

State is suspended, its bank accounts are closed, and its office is closed down.

11. iWitness purported to engage in the business of installing security

cameras.

12. Engel’s investors are members of the Orthodox Jewish community

primarily located in Los Angeles and New Jersey.

13. Engel was an active member of an Orthodox synagogue in Los Angeles.

He met investors through the synagogue as well as through introductions from other

members of the community.

14. Engel cultivated a reputation in the Orthodox Jewish community as a

studier of Torah and as a generous donor. He opened his own small synagogue in a

room next to his iWitness office, and spent time teaching Torah to others. iWitness

investors believed Engel to be trustworthy as well as charismatic.

15. Engel, however, exploited the goodwill he engendered through his

community activities to engage in a fraudulent securities offering scheme.

2. Engel’s Fraudulent Securities Offering and Solicitation of Investors

16. From at least December 2018 to January 2021 (two months before Engel

fled the United States), Engel offered investments in iWitness that ranged from

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 3 of 14 Page ID #:3

COMPLAINT 4

$15,000 to $1.3 million in the form of short-term (from two weeks to six months)

loans that provided a high rate of return (between 10% and 60% annualized interest).

17. These investments were frequently memorialized as promissory notes

that Engel signed. The notes were also purportedly secured by an iWitness invoice

and accompanied by a Hebrew document called a Heter Iska that made the

investment legal under Jewish religious law.

18. Some iWitness investments were documented orally by Engel or over

text message.

19. Engel drafted all investment documentation, including iWitness

promissory notes and Heter Iska documents, drafted texts to investors, and had

ultimate authority over the representations made therein, including their content and

whether and how those statements were communicated to investors and potential

investors.

20. Whether memorialized orally, in an informal writing, or through a

promissory note, Engel represented to all iWitness investors that returns on their

investment would be obtained through his and iWitness’s security camera installation

business and/or land development efforts alleged below. All of the investors

understood that they were to receive profits from the efforts of others. The investors

understood that they risked the loss of their funds.

21. When investors asked Engel why he didn’t borrow money from the bank

at a lower rate of interest, he told them that, because he was from Israel, he did not

have sufficient credit in the United States.

22. On information and belief, this was false, and the reason Engel could not

obtain bank financing was because his businesses were not real.

23. Typically, investors sent money to Engel and iWitness by wire or by

check. But, in some instances, Engel told investors to wire funds to another investor.

Purported returns were also occasionally wired to investors via a wire from another

investor.

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 4 of 14 Page ID #:4

COMPLAINT 5

24. Most iWitness investors did not question this flow of funds, but the ones

who did were told that they needed to send money via the third party because the

third party was capable of changing money in Israel at lower rates than the banks.

This was another falsehood.

25. Engel also lulled iWitness investors in various ways into being

comfortable investing with him: he offered to do the initial investment with a credit

card that contained fraud protection; he referred investors to others in the community

who had invested with him and purportedly successfully earned returns; and he

occasionally asked other members of the community to act as guarantors for the

investments.

26. A subset of investors were brought into the scheme by Individual A, who

had previously invested in Engel’s projects, was unaware of the fraud, and believed

the investments would be beneficial to his friends. Individual A acted as a go-

between with this subset of investors, who largely did not meet with Engel. Engel

provided all information regarding the investments to Individual A, who passed that

information along to this subset of investors. Individual A told these investors that

their investment would be used to fund Engel’s businesses, but that they could

characterize the investments as loans to Individual A that Individual A personally

guaranteed. These funds were sent directly to Engel and iWitness, and investors

understood that their money would be used to fund Engel’s camera installation or

property development projects. Individual A, who ultimately lost over $700,000 of

his own money, is now repaying these investors over $5.7 million because of the

guarantees that he signed.

3. Engel’s False and Misleading Statements About iWitness’s Business

27. From at least December 2018, Engel represented to investors and

potential investors that he needed capital to purchase cameras and other equipment

for his purported iWitness business. He further represented to investors and potential

investors that he would pay their investment returns from installation fees generated

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 5 of 14 Page ID #:5

COMPLAINT 6

by iWitness’s security camera business.

28. As one example, at various times in 2018 and 2019, Engel told a

potential investor, both orally and via text, that he had a specific camera installation

job for which he needed to purchase equipment. Engel represented to the investor that

he “got a better deal” when he personally supplied the equipment, that he needed

funds to purchase that equipment, and that he would pay the investor his principal

and a return after iWitness was paid for the job. Over the course of 2018 and 2019,

Engel offered this investor multiple variations on this deal, for different camera

installation jobs, in varying amounts (approximately $50,000 to $180,000), with

varying terms (approximately 4 weeks to 6 weeks), and for varying rates of return

(approximately 10% to 20%). These and the other representations Engel made to

investors and potential investors about the nature of iWitness’s business and how

their investment returns would be generated were false.

29. In reality, iWitness’ camera installation business was never profitable.

30. Over the course of five years, iWitness only worked on projects worth a

total of approximately $10,000 to $20,000 for only 20 to 30 clients.

31. iWitness employees often performed no work for the installation

business.

32. On information and belief, Engel knew that iWitness’s camera

installation business was unprofitable. He used investor funds to pay for office rent,

cars, and payroll so as to maintain the appearance of a profitable, ongoing business.

When investors came to Engel’s office, they saw a physical office, employees, and

trucks.

33. Engel’s representations about iWitness’s operations and the source of

investor returns, and the appearance of iWitness as a profitable, ongoing business,

were all material to investors’ decisions to invest in iWitness.

4. Engel’s Land Development Scheme

34. On or around April 2020, Engel started pitching a different investment

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 6 of 14 Page ID #:6

COMPLAINT 7

through iWitness. He started telling investors and potential investors that he was

developing property in Israel.

35. Specifically, Engel told investors and potential investors that he had a

special relationship with the mayor of Bnei Brak, a town in Israel with a high

concentration of Orthodox residents, and that this special relationship allowed him to

fast track the development of additional units in apartment buildings.

36. Engel further told investors and potential investors he would use investor

funds to purchase buildings in Bnei Brak, and then remodel the buildings to add

additional units, later selling the apartments slightly below market, which would lead

to a quick sale and generate a profit.

37. In connection with this pitch, Engel sent investors and potential investors

videos and pictures of an apartment building in Israel, a video of him sitting in the

office of the mayor of Bnei Brak (thereby demonstrating his special relationship),

copies of purported land registrar documents that showed ownership of the units, and

copies of alleged land registrar documents of other apartments he supposedly owned

which would act as collateral for the investments.

38. For example, on or around April 2020, Engel orally told an investor that

he had a big real estate project in Israel. Engel told the investor that he was buying

two one-story apartments on the top floor of a building because he had special

connections that would allow him to get a permit to build a floor on top of these units,

which would enable him to build an additional two units. He told the investor that he

would complete the project in seven or eight months, and that his plan was to sell the

building slightly under the market price, thereby allowing him to flip it quickly and

still make a reasonable return. He presented this investor with a contract, pictures of

the building and apartment, and the video of himself sitting with the mayor of Bnei

Brak.

39. In reality, as Engel later admitted, there were no such properties.

40. Engel knew that his land investment scheme was based on lies.

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 7 of 14 Page ID #:7

COMPLAINT 8

41. The purported land registrar documents were fake.

42. The videos of the apartments were also fake; they were only videos of

apartments he used to live in, rather than properties iWitness planned to invest him.

43. The video of Engel with the mayor was a video of him simply saying

hello to the mayor of Bnei Brak, with whom he did not have a special relationship.

44. Engel’s representations to investors about his property investment

business were material to their decision to invest in iWitness.

5. Engel Misappropriated Investor Funds to Make Ponzi-Like Payments

45. In reality, Engel was running a Ponzi-like scheme. He used the money

he raised from investors to make purported profit distributions to earlier investors, or

to fund his lifestyle.

46. Engel used the investor funds, together with the funds from other

sources, to pay for the costs of his business (including rent, payroll, and cars). He also

used the funds to pay his personal rent and other living expenses, to make donations,

and to fund his synagogue. He sent over $2.5 million to currency exchangers in

Israel, and he withdrew over $861,000 in cash. He also used some of the money to

fund elements of a lavish lifestyle –he spent $56,880 at casinos and to fly on private

jets at least twice.

47. Excluding what Engel distributed to his investors in illegitimate Ponzi-

like payments, Engel directly received $5,918,976 in ill-gotten gains from investors.

B. Engel Offered and Sold Securities

48. The investment opportunities that Engel offered and sold are securities

as either notes or investment contracts.

1. The iWitness investments are securities because they are notes

49. Investors received documents styled as promissory notes that set forth

principal and interest payments, in addition to a religious document that rendered the

investments as legal under Jewish religious law.

50. Investors were primarily motivated by the generation of profits when

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 8 of 14 Page ID #:8

COMPLAINT 9

investing in iWitness notes.

51. iWitness note investors reasonably expected that they were making an

investment.

52. There is no regulatory scheme or factor that significantly reduced the

risk of the iWitness investments, such that a court should not apply the federal

securities laws to Engel’s note offering.

2. The iWitness investments are securities because they are investment

contracts

53. iWitness investors transferred money to Engel and iWitness and they

risked the loss of those funds.

54. iWitness investor funds were pooled in iWitness’s and Engel’s bank

accounts.

55. iWitness investors were dependent on Engel to install cameras or

develop property in Israel in order to make an investment profit.

56. Engel’s fortunes were tied to those of his iWitness investors.

57. Engel promised significant returns to iWitness investors, who would

only receive those returns through Engel’s and iWitness’s efforts to buy camera

equipment and install it for a profit, or their efforts to buy, develop, build, and sell

properties in Israel at a profit.

58. Based on Engel’s representations about their investment, iWitness

investors reasonably believed that iWitness and Engel would perform all of the

services necessary to generate investment returns, and that iWitness and Engel were

wholly responsible for deriving those returns for entirely passive iWitness investors.

C. Engel’s Scienter and Unreasonable Conduct

59. At all relevant times, Engel acted with scienter, or at a minimum, was

deliberately and consciously reckless, and his unreasonable conduct was negligent.

60. Engel did, or directed, all of iWitness’s fundraising from investors.

61. Engel made all of the false and misleading statements communicated to

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 9 of 14 Page ID #:9

COMPLAINT 10

investors that concerned their investments in iWitness.

62. Engel controlled iWitness’s bank accounts and directed all of the Ponzi-

like payments made by iWitness.

63. At the end of December 2020, Engel’s scheme collapsed. Engel, who

had been urging investors to roll over their investments or agree to additional time for

repayment, was unable to solicit additional investments to cover his obligations, and

he fled the United States.

64. After a flurry of emails in which he apologized for ruining people’s lives

due to his “sickness,” he briefly returned and, during that time, he met with some

investors who were attempting to salvage their losses.

65. Engel eventually signed a notarized statement on or around February 7,

2021, admitting to securities fraud, and he participated in a recorded meeting with

several investors on or around March 2021 in which he admitted that he was running

a Ponzi scheme.

66. During that meeting, Engel made a series of admissions regarding

iWitness’s fraudulent securities offering.

67. He admitted that iWitness’s security camera installation business was

never profitable.

68. He admitted that iWitness’s represented property development business

in Israel was a fiction because there were never any investment properties.

69. He admitted that the property deeds he had provided iWitness investors

were fake.

70. He admitted that the videos of the apartments he had provided iWitness

investors were just videos of apartments he had resided at in the past.

71. He admitted that the video of his meeting with Bnei Barak’s mayor was

simply a greeting and that he had no special relationship with the official.

72. Although Engel told investors that he would try to pay them back at that

time, he fled to Israel shortly thereafter and has not returned to the United States.

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 10 of 14 Page ID #:10

COMPLAINT 11

FIRST CLAIM FOR RELIEF

Fraud in the Connection with the Purchase and Sale of Securities

Violations of Section 10(b) of the Exchange Act and Rule 10b-5

73. The SEC realleges and incorporates by reference paragraphs 1 through

72 above.

74. Engel engaged in a fraudulent scheme in which he raised over $47

million through the sale of securities by, among other things: telling investors that

iWitness would use the funds to purchase camera equipment or develop property,

when, in fact, the funds were used to make Ponzi-like distributions to other investors

and for Engel’s personal benefit; falsely representing to investors that iWitness had a

profitable and ongoing business of installing camera equipment; omitting to tell

investors that returns had been paid from new investor funds; telling investors that he

was borrowing from retail investors instead of banks because of insufficient credit

when, in fact, Engel was perpetrating a fraud; telling investors who received funds

from, or sent funds to, other investors that the reason for this flow of funds was to

reduce the costs of exchanging currencies when, in fact, the funds were Ponzi

distributions; providing investors with false documents that purported to show that

Engel owned properties in Israel as well as false documents that purported to show

that Engel owned properties that could serve as collateral; and providing investors

with pictures of apartments that he was going to develop when, in reality, the pictures

merely depicted pictures of an apartment he used to live in. Engel knew or was

reckless in not knowing that the above misstatements and omissions were false or

misleading.

75. By engaging in the conduct described above, Engel, directly or

indirectly, in connection with the purchase or sale of a security, by the use of means

or instrumentalities of interstate commerce, of the mails, or of the facilities of a

national securities exchange: (a) employed devices, schemes, or artifices to defraud;

(b) made untrue statements of a material fact or omitted to state a material fact

Case 2:23-cv-00213 Document 1 Filed 01/12/23 Page 11 of 14 Page ID #:11

COMPLAINT 12

necessary in order to make the statements made, in the light of the circumstances

under which they were made, not misleading; and (c) engaged in acts, practices, or

courses of business which operated or would operate as a fraud or deceit upon other

persons.

76. By engaging in the conduct described above, Engel violated, and unless

restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act,

15 U.S.C. § 78j(b), and Rules 10b-5(a), 10b-5(b), and 10b-5(c) thereunder, 17 C.F.R.

§§ 240.10b-5(a), 240.10b-5(b) & 240.10b-5(c).

SECOND CLAIM FOR RELIEF

Fraud in the Offer or Sale of Securities

Violations of Section 17(a) of the Securities Act

77. The SEC realleges and incorporates by reference paragraphs 1 through

72 above.

78. Engel engaged in a fraudulent scheme in which he raised over $47