Civil Case (Center) 31902-02-21 Excalibur Online Ltd v. Raphael Ben Arar, Israel Police - part 3

It should be noted that some of the remedies claimed were not included in the statement of claim and were later added in Rafi's affidavit, without requesting an amendment to the statement of claim.

It was also claimed that Rafi was deliberately excluded from CyberTrade's financial affairs.  Sarel and Shahar worked to establish another offshore company called CFD Group (hereinafter: "CFD"), in which Sarel and Shahar controlled and presented Rafi with a representation that, from a legal standpoint, it is necessary that the funds raised from clients be paid to CFD as a conduit through which the receipts will be transferred to CyberTrade.  Rafi did not have access to CFD's bank account and Sarel and Shahar completely excluded him from access to CFD documents, including the accounting documents.

3. The "Sirin Labs" coin affair - At the beginning of 2018, Rafi, Sarel and Shahar jointly purchased a virtual currency called "Sirin Labs". After the acquisition, the value of the coin increased, creating a profit of about $3.5 million for the three of them.  The coin was held by Sarel using a "digital wallet".  According to Rafi, he demanded that Israel redeem the coins they had purchased at a profit, or sell his share of the coins, but he refused and suffered damage in the amount of about $1.2 million.
4. The defendants denied the allegations and claimed that:
5. This is a baseless lawsuit, which comes only for the purpose of trying to serve as a "counterweight" to the loan claim.
6. Cybertrade is a start-up company that involves considerable risk to invest in it from the outset, as there is a possibility that the attempt to develop the planned system will not succeed and/or that it will not be successful, so that the funds invested will go down the drain.

• The system developed by Cybertrade was an excellent trading system that was in demand and generated profits. The system included: a trading system, websites, a CRM system for managing customer relationships and deposits, and more.  Millions of shekels and many hours of work have been invested in the development of the software, and there is no basis for the claim that only a "landing page" has been opened that interfaces with existing websites.

1. The claim that Rafi only found out in retrospect that the company was receiving services from the British company that provided a trading engine is baseless. The details of the monthly costs for the services of the British company were sent to Rafi as early as September 2014 (Appendix 51 to Sarel's affidavit), and the decision to contract with the British company was a joint decision of Sarel, Shahar and Rafi.
2. With regard to regulation, the regulation soon after the establishment of Cybertrade was not realistic in the first years in view of the sums involved. Cybertrade and CFDs worked without regulation based on a legal opinion (Appendix 53 to Sarel's affidavit) and clearing companies and banks worked with them.  This, with Rafi's knowledge and approval, did not even raise any claim in this matter in real time.
3. The representation that the software will be on the air and will work with customers as early as the 6th month of the venture, and from the 15th month, the venture will generate a net profit, is an estimate only. This is a start-up company, and in practice the development took longer.

• The initial intention was to recruit customers online. After it became clear that the development would take another long time and would involve costs, Sarel and Shahar offered the option of switching to marketing through the "Call Center".
• The claim that it was agreed that Sarel and Shahar would work without pay is not true. The founders' agreement stipulated that Sarel and Shahar would work at Cybertrade as managers for a period of 12 months.  At no stage was it agreed that Sarel and Shahar would work without pay, but on the contrary, it was clearly stated in the Excel report (Appendix 75 to Sarel's affidavit) that Sarel and Shahar would earn a symbolic sum of ILS 10,000 each, which is an extremely low salary for the high-tech industry, certainly in relation to the position they performed.  In real time, no claim was raised in this regard by Rafi.

1. The claim that Sarel and Shahar abandoned CyberTrade's activities, operated within its offices as part of their other business activities, and for this purpose used Cybertrade's offices and employees whose salaries Cybertrade paid for the purpose of promoting their private businesses, is baseless. Similarly, the claim that Sarel and Shahar spent advertising on Cybertrade in order to promote the dating sites they established should also be rejected.  Moreover, that this is an extension of the façade, since the remedies claimed in this matter were not claimed in the statement of claim, have no basis in reality.
2. Additional arguments raised by the plaintiffs should also be rejected, including a claim regarding an erased deposit of ILS 216,515, in relation to the interest that Sarel and Shahar credited in their favor in the amount of ILS 68,500, the use of flight points in the amount of ILS 25,000, and the exchange of funds in the amount of ILS 104,000. The claims were not proven by the plaintiffs and are unsubstantiated.
3. Contrary to what is claimed, over the years Rafi would come to Cybertrade's offices regularly and was involved in its activities. He received regular updates from Israel and Shahar, was a full partner in the decisions and was familiar with CyberTrade's activity, revenues, expenses and profits.  CPA Vatori, the CFO of Cybertrade (Rafi's confidant) had full access to CyberTrade's bank accounts and CFDs.  In addition, Rafi received all the documents from the accounting firm Steinmetz Aminoach and the bookkeeper of Cybertrade.

• As for Sirin Labs, Mr. Yaniv Levy (hereinafter: "Yaniv"), with whom business cooperation began in Cybertrade began in 2017, suggested that Rafi, Sarel and Shahar join it in investing in crypto ventures through the purchase of digital currencies. In accordance with the terms of the investment agreement between the parties, Yaniv has the authority to decide on the purchase and/or sale of the coins, and he prevented the sale of the coins at the relevant time.  Sarel and Shahar refused to act in contravention of Yaniv's instructions, fearing that the personal guarantee given to them by Yaniv to secure their investment in the coin would expire.  Rafi did not ask to sell only his share at the relevant time, nor was it feasible in view of the characteristics of the digital currency market.  Rafi did not raise allegations against Sarel and Shahar in real time, and even continued to invest with Sarel and Shahar in digital currencies even after that alleged loss.  Rafi's claim of losses is incorrect since he ultimately made a profit, and the deal ended with a total profit of $2.5 million.

19. The defendants also raised offset claims that are mostly consistent with their claims in the lawsuit they filed in the framework of CA 16633-03-24, as detailed below.
20. CA 16633-03-24

• The plaintiffs are Sarel, Shahar and companies under their control: Full Position, Wizz Star and Cyberlogic.

The defendants are Rafi and Adim.

21. The background to the lawsuit is the entry in March 2017 of additional partners into CyberTrade, namely Yaniv Levy and Oren Ozeri (hereinafter: "Oren") through Optimotech in a tax appeal (hereinafter: "Optimotech") and a transition to marketing manually through "Call Center".
22. The agreements with Optimotech were that it would make use of CyberTrade's software and in return would pay the company a total of 12% of any amount received by it as part of its Forex (foreign exchange) activity. It was also agreed that after the total cumulative payment is ILS 6 million, Optimotech will be allocated shares of Cybertrade at a rate of 25% of CyberTrade's issued share capital.
23. As claimed in the lawsuit, in retrospect it turned out that Optimotech charged customers' credit cards without authorization and for sums higher than what was agreed with the customers. This was done without the knowledge of Sarel and Shahar and using CyberTrade's clearing accounts and software.  For this reason, the CFD company's clearing accounts have been blocked.
24. Following the blocking of the accounts, it was decided that all of CyberTrade's revenues, including income from its independent operations, would be transferred to clearing accounts controlled by Yaniv and Oren, and from there to accounts owned by them.
25. However, as of March 2018, Optimotech began to delay the revenue payments to which Cybertrade was entitled.
26. On April 1, 2018, an agreement was signed between Cybertrade and Optimotech for the allocation of Cybertrade shares to Optimotech for a total of ILS 166,667. At the end of April 2018, Optimotech was allocated shares at a rate of 25% of CyberTrade's issued capital without the consideration being transferred in respect of them.
27. Even after the allocation of the shares, Optimotech did not transfer to Cybertrade the consideration for the shares allocated to it or the clearing money.
28. In November 2018, Optimotech owed Cybertrade a total of €1,871,434.
29. In this state of affairs, Rafi reached agreements with Yaniv for the recovery of the debt of the clearing funds and the losses by virtue of the investment agreement, as detailed below:
30. Rafi demanded to receive the remaining sum in the joint digital wallet in the amount of $397,342 and transfer it to Yaniv, so that he could make additional investments in various crypto ventures, with the aim of returning to Sarel, Shahar and Rafi the losses that were created. On March 12, 2019, the balance of the investment funds was transferred to Rafi.
31. Rafi claimed that he had signed an agreement with Yaniv (which was not given to Sarel and Shahar) and that he was even given a third-party guarantee in the amount of $360,000, which was intended to ensure the return of the balance of the investment money.

• In accordance with Rafi's demand, in March 2019, Sarel and Shahar transferred full control of the software they had developed to Yaniv and Oren for the purpose of operating the trading system developed by CyberTrade. Later, on May 22, 2019, Yaniv and Oren were also forced to transfer the software code and CyberTrade's customer database.

30. Although Sarel and Shahar acted in accordance with Rafi's demands, Yaniv did not fulfill his part of the agreement, and in the end, Cybertrade ceased its activity and took a voluntary liquidation proceeding. To date, he has not returned the losses by virtue of the investment agreement, the debt of the clearing funds, and the balance of the investment funds that was in the digital wallet has gone down the drain.
31. In retrospect, it turned out that Rafi used CyberTrade's software and customer database together with Yaniv and Oren under another website called ZET10, and received a refund in relation to his share of the settlement money debt in the sum of about €490,000
32. In light of this, the plaintiffs petitioned:
33. To instruct the defendants to pay CyberLogic, jointly and severally, the sum of 2,021,118 together with interest and linkage in accordance with law for the loss of the investment funds in CyberTrade.
34. To instruct the defendants to pay Pool Position and Wiz Star, jointly and severally, a total of ₪326,666.67, the value of which as of the date of the debt is ILS 1,311,534, plus interest differentials and linkage in accordance with the law for their relative share of the debt of the clearing funds.

• To instruct Rafi to pay Sarel and Shahar a total of $262,245, the value of which as of the date the debt was created, is 902,122 plus interest and linkage differentials in accordance with law, for the theft of the investment funds in currencies.

33. It is also requested to oblige the defendants to pay, jointly and severally, to Pool Position and Wizz Star the sum of ₪33,333, the value of which as of the date the debt was created, in the sum of ILS 126,032 plus interest and linkage differentials for the illegal theft of funds from CyberTrade, and to pay CyberLogic the sum of ILS 380,000, plus interest and linkage differentials for the illegal taking of funds from CyberTrade.
34. According to the plaintiffs, Rafi should be personally obligated to recover the relative share of Full Position Wiz Star in the debt of the clearing funds, the loss of CyberLogic's investment in Cybertrade, and the relative share of Full Position and Wizz Star in the loss of the system's maintenance expenses, since in his actions and omissions, Rafi violated his fiduciary duty to the shareholders, and acted in bad faith and in a conflict of interest as an officer of CyberTrade. In accordance with the provisions of section 254(a)(1) of the Companies Law.  It was also argued that Rafi should not be allowed to hide behind the veil of Adirim's incorporation and that the veil should be lifted by virtue of Section 6 of the Companies Law.  He must also be held liable for violating the duty of care under sections 35 and 36 of the Torts Ordinance, together with section 252 of the Companies Law.
35. The defendants denied the allegations and claimed that:
36. The clearing funds do not constitute a debt of Optimotech to Cybertrade, but rather it is a risk involved in CyberTrade's activity in a non-regulatory manner, and in light of the clearing companies that Sarel and Shahar chose to work with.
37. The real debt to Optimotech is as a result of its investments in Cybertrade, which were wasted due to the cessation and liquidation of CyberTrade's operations. This is why Rafi reached an agreement with Yaniv in which the digital wallet was transferred to Yaniv.  It was agreed that if Optimotech succeeds in collecting funds, they will be transferred to it at the expense of its return on investment.  It was also agreed that a copy of CyberTrade's computerized system would be transferred to Optimotech, so that Sarel and Shahar could continue to operate the system in their possession, without restriction.  Therefore, Sarel and Shahar gave Optimotech only a duplicate of the system.  It was also agreed that the operation of the system and its expenses would be at the expense of Optimotech, and that if the system would generate profits, Cybertrade would be paid about $1 million in 10 equal monthly installments.

• The agreements constitute a waiver of each side's claims against the other. Therefore, Yaniv was not sued by Sarel and Shahar.

1. This is a tactical and belated lawsuit that tries to serve as a counterweight to the coin claim. It is clear that this is not a true claim, since the plaintiffs refrained from suing Optimotek, Yaniv and Oren, who, as their claims indicate, are ostensibly the main debtors.

The Evidence