A woman traded in the capital market through an Israeli company. The company representatives acted under fictitious identities, presented themselves as certified advisors, promised false “bonuses,” and applied continuous pressure on her to deposit funds while concealing material risks and without a proper license. As heavy losses accumulated and after she requested to withdraw her remaining funds, the woman was required to either continue trading or sign a waiver of claims as a condition for the return of part of her money. Shortly thereafter, the company was voluntarily liquidated, but at the woman’s request, it was revived by the Court at the beginning of the legal proceeding.
The Court held that the company, its shareholders, and its directors are jointly and severally liable to compensate the woman. As a rule, a company is a separate legal entity, but in exceptional cases, the corporate veil may be pierced and its shareholders and officers may be held personally liable. One such case is when funds are extracted from a client without in good faith and not for a legitimate purpose, without providing in return the service that was purchased. Here, the company representatives constructed a sophisticated false representation intended to cause the woman to extract as much of her money as possible and transfer it into their own pockets without any rational connection to the level of success or the logic of the investments made. Accordingly, they were held jointly and severally liable to compensate her.