Civil Case (Center) 31902-02-21 Excalibur Online Ltd v. Raphael Ben Arar, Israel Police - part 9

The Coin Venture (CyberTrade)

89. This is a joint venture that was established in 2014 as part of a joint venture called CyberTrade, controlled by Sarel, Shahar and Rafi through companies under their control, whose business was the development and operation of software for trading in contracts for difference (CFDs).
90. According to the plaintiffs, Sarel and Shahar made false representations to them in a number of aspects:
91. Representations as to the nature of the Software.
92. Representations with respect to the regulation of the Software.

• Representations regarding the performance and economic results of the joint venture.

1. Representations regarding the professional experience of Sarel and Shahar to establish and operate the venture.
2. Other allegations focused on the fact that Sarel and Shahar abandoned CyberTrade's activities, operated from its offices as part of their other business activities, and for this purpose used its offices and employees whose salaries Cybertrade paid, and burdened CyberTrade with expenses in order to promote their businesses, while compartmentalizing Rafi.

The Claim of Misrepresentations

92. In accordance with case law, misrepresentation can be made actively by presenting misleading or inaccurate data and passively by not presenting essential data (see Civil Appeal 3824/13 SF Wing Overseas Real Estate Investments Ltd.   Yaniv (Nevo, March 1, 2016)).
93. When a claim is made that false representations were made - whether they are incomplete or misleading overrepresentations - the claimant has an increased burden of proof, which requires the presentation of evidence of greater weight and strength than usual in civil law (see, for example : Civil Appeal 3546/10 Mishali v.  Klein (Nevo, 18 April 2012)).  Therefore, the plaintiffs should have lifted a heavier burden of proof than the "regular" burden in the civil proceeding.
94. Another aspect that has implications for the plaintiffs' claims is the fact that Cybertrade is a start-up company, in which the investment, from the outset, carries a high risk, including the risk of losing the entire investment. This nature may have an impact on the possibility of imposing personal liability on officers for business failures resulting from the inherent risk that exists in investing in such ventures.
95. Below I will address the arguments on their merits, based on the above principles.

Representations with respect to the nature of the software

96. According to the plaintiffs, Sarel and Shahar presented them with a representation that the venture would be similar to the one established by Plus500, i.e., that an automated, independent and complete system would be developed that included a trading server and the ability to recruit customers online.
97. In practice, according to the plaintiffs, Sarel and Shahar never intended to develop a complete system, but only a "landing page," i.e., a system that is completely dependent on receiving services from a British company, which was the engine for the venture. In addition, a false representation was presented that the recruitment of customers would be online, but in practice, it was necessary to recruit customers manually, through a "call center".
98. As will be detailed below, the plaintiffs did not meet the burden of proof imposed on them to prove these claims.
99. As mentioned, this is a start-up company, whose activity involves increased risk, which includes a significant probability that the development will not succeed, and that the company will not reach the finished product it had planned. Therefore, even if the plaintiffs were presented with a representation that did not materialize in the end, this does not necessarily lead to the conclusion that the representation was a misrepresentation.  In order for the representation to be considered a misrepresentation, the plaintiffs must prove that from the outset there was an intention to develop a different product than the one presented, and this was not proven.
100. The claim that Sarel and Shachar intended only to develop a "landing page", and that they did indeed do so, was not proven.
101. Shahar, who has about 20 years of experience in the field of software development, described in chapter B(2) of his affidavit the great work that was invested in the development of the software. According to him, Cybertrade has developed a trading system, websites, a CRM system for managing customer relationships and deposits, a notification system and Android and IOS applications for the field of online trading, and that many hours of work have been invested in the development of the venture, using a number of code and software personnel.  In order to prove his claim, Shahar attached references from the task management system from which, according to him, it appears that more than a million lines of code were written, which indicates the scope of the work that was invested in creating the software (Appendices 17, 19, 21-22 to Shahar's affidavit).
102. Shahar was questioned about his affidavit and his version was not contradicted. He reiterated that he devoted most of his time to working at Cybertrade (transcript of March 17, 2025, p.  221, paras.  7-8 and 20-22).
103. Oren, with whom Cybertrade has collaborated since 2017, who is also a software professional, confirmed in his testimony that the software developed is not a "landing page." Thus he said in the minutes of the hearing of March 17, 2025, at p. 115, paras.  6-8:

"Q.  Ok.  All right.  Confirm to me that this is not a landing page, right?

1. It's a CRM system"

And later, in verses 14-15: