The owner of the ultra-orthodox investment group in Sadano, Baruch Eliezer Gross, is suspected of raising tens of millions of shekels from hundreds of investors during the years 2019-2022 while misleading them, presenting false representations regarding the use of the funds and transferring the funds not for the benefit of the guaranteed investment, and also that he sold securities without a prospectus as required by law.
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Gross was released nearly two weeks ago under restrictive conditions and was required to post a bank guarantee in the amount of half a million shekels and two third party guarantees in the amount of 750 thousand shekels each. These are intended to ensure his presence for the continuation of the investigation. At the beginning of the investigation, a gag order was issued, which was canceled today (Monday).
The investment group in Sedano includes dozens of Israeli and American companies and partnerships, which raise funds for investments from the ultra-Orthodox religious public in start-up companies and technology and real estate ventures. The group is headed by the management company “Pernasha Management B.S.D. Ltd.”, whose main shareholder is Gros, which owns 57% of the shares. The group appeals to the ultra-orthodox public in Israel and the US, and has invested, according to it, hundreds of millions of shekels in dozens of projects to date.
The Securities Authority began an open investigation a week ago, but the investigation began more than a year ago in the Audit and Evaluation Department, and moved to the Investigations and Intelligence Department. On October 19, Gross was questioned on the suspicion that he committed between the years 2019-2022 the offenses of offering and selling without a prospectus, receiving anything fraudulently for aggravated reasons and money laundering. Other people involved in the case were also investigated. The Securities Authority demanded that the group stop recruiting new investors, and the recruitment was stopped, according to Gross’s lawyer.
Gross objected to publication
Gross objected to publishing the name of the company and his name. “I built this business in 10 years. We have an excellent name, people love us, and the publicity could cause us irreparable damage,” he claimed. On the other hand, the Securities Authority claimed in court that the publication of the investigation would harm investors. A representative of the Securities Authority claimed that “there is an interest here in warning the investing public. This is a capital market person known to the public.”
The Basedano group responded that “the companies are cooperating fully with the Securities Authority and have provided all the requested materials. We have excellent answers to the Authority on every issue it has raised. Our investors are safe, and their investments will continue to increase in value with God’s help.”
The group also said that they “put their hands on the Securities Authority and are sure that it does not intend to create a precedent on the company’s back, as a result of a different legal interpretation of some of the actions carried out by the company and which were backed up by legal opinions.” The group also states that all the information that the investors requested before the investment and during the investment, was provided in detail.
We note that in 2017 an enforcement settlement was made with the Basdano Group and Gross due to the offering of securities without a prospectus. According to the arrangement, two companies in the group raised funds without a prospectus, and funds were raised from over 35 investors without a prospectus in the years 2011-2015. A fine of NIS 200,000 and a conditional fine of the same amount were imposed on the Basedano group. A fine of NIS 100,000 and a suspended fine were imposed on Gross.
*** Presumption of innocence: Baruch Eliezer Gross was not accused, was not convicted, and has the presumption of innocence.