The British real estate market has been pitched in recent years in Israel as an attractive investment opportunity. However, a recent liquidation request for an investment marketing company, submitted earlier this month to the District Court in Lod, reveals quite a colorful tale. This involves an investment totaling tens of millions of dollars in senior housing in Britain, which turns out to be an alleged scam worth about $100 million, where dilapidated properties were marketed as exclusive housing.
Senior housing units were marketed in Israel by Galon Invest, a subsidiary of Galon Group, founded by Yossi Galon, former founder of Makhteshim Agan Russia and an envoy of the Ministry of Foreign Affairs to Eastern European countries. Galon Invest is currently managed by his two sons, Itai and Ilai. Galon served as a sub-marketer in Israel for a company called Carlauren, owned by British entrepreneur Sean Murray. The investment product was "luxury senior housing units" in England, marketed between 2018 and 2019 with particularly attractive terms.
Galon sold rights in senior housing units as a lucrative deal, which included two main commitments from Carlauren: payment of rent at a rate of 10% of the property's value for 10 years and repurchase of the senior housing unit after the investment period, at an amount reflecting a return of at least 10% on the purchase price. In other words, Carlauren and Galon promised investors a double return – both in rental income and in the repurchase.
According to the liquidation request, Galon sold 148 senior housing units in England to the Israeli public, half of which belonged to Carlauren, charging a commission of 5% to 6% on each sale. Investors paid between $80,000 and $135,000 for the right to a housing unit. Galon attracted customers through internet ads, investment advisors and insurance agents.
However, despite the promises, investors' dreams quickly unraveled. In April 2019, Carlauren ceased payments to Israeli investors. By September 2020, a complaint was filed by 36 Galon customers, who claimed that company representatives described the investment in Carlauren's properties as risk-free and portrayed the British company as "veteran and financially robust, owning dozens of buildings across England operated as the most luxurious senior housing, along with additional business activities, including in aviation."
Investors were also told that Carlauren "charges its tenants in England a monthly fee of around £5,000 or more for the use of each purchased housing unit" and therefore would have no difficulty meeting its commitments. When Israeli investors investigated the nature of the properties on which they had acquired rights, they discovered, according to the lawsuit, that "the properties are abandoned and do not generate any income for Carlauren from their operation as senior housing. Therefore, it appears that the plaintiffs fell into a 'Ponzi' scam, in which the rent payments made to the plaintiffs for a short period were actually funded by the investment money of later buyers, without any real economic activity enabling the payment of rent to the plaintiffs."
They also discovered that Murray "is a fraudster who was previously involved in similar fraudulent transactions in the U.S. and was even appointed a trustee in bankruptcy in England" and that Murray "embezzled the funds paid by investors, financing private purchases of luxury cars, a yacht and a private plane." Furthermore, Carlauren had never previously operated senior housing properties, and those marketed as luxury senior housing were abandoned houses. Murray sold rights to over 600 investors in senior housing units, leaving debts of more than £76 million, nearly $100 million. According to sources close to Galon, the amount of capital raised for Carlauren was between $8 million and $13.5 million, which disappeared.
"We relied on the experience of the family patriarch, Yossi Galon, and his connections in England. Investors were aware that, from his perspective, this was only a brokerage deal. There was no indication of what was happening behind the scenes. The English entrepreneur's (Murray's) reputation preceded him. He had many years of experience in the industry. From his perspective, it was like investing in the good times in Isaac Tshuva's properties," explained Itai Galon to Calcalist. Galon was ordered to pay investors $1 million, of which $605,000 will be paid directly by the shareholders. According to the liquidation request, the disappearance of investors' funds did not dampen Galon's desire to continue in the senior housing sector in England.
In the second phase, the Galon family established GWC Group, which dealt with purchasing senior housing in England and marketed it directly to Israeli investors. GWC's subsidiary, CARTWRIGHT, acquired land on which two senior housing facilities are being built, one in Leeds and the other in Manchester. Additionally, the shareholders established other subsidiaries that operated the senior housing facilities. The company managed to raise an additional $8 million from investors, and the properties were purchased in March 2020. However, with the outbreak of the coronavirus, supervision procedures in British public housing institutions were changed, and GWC failed to meet the payments promised to investors. Now it is seeking liquidation.
Galon predicts that other investors in Carlauren projects, as well as investors in projects initiated by Galon itself, will file financial claims against them. Thus, the $8 million invested in those properties are also at risk. GWC has been negotiating with unit buyers in recent months to find an agreed-upon outline for the fate of their investments, but the parties have not yet reached an agreement. Galon's response, represented by attorney Rami Kogan: "Out of responsibility and the desire to avoid creditor preference and according to the principle of equality, we approached the court so that anyone claiming to be a creditor would receive relief in a legal and informed manner."