Alleged crypto scams, sex offenses, unpaid bills: The claims against Moshe Hogeg

Moshe Hogeg, the owner of the Beitar Jerusalem soccer club and an at-times celebrated entrepreneur and investor, has faced his fair share of legal troubles in recent years. The 40-year-old Tel Aviv resident has been sued numerous times since 2018, both in the US and in Israel, for allegedly misleading and defrauding investors and partners in various projects involving digital currencies, dummy companies, and a $1,000 blockchain smartphone that never quite made it to market.

On Thursday, Hogeg and seven other suspects were arrested as part of an Israel Police operation on suspicion of involvement in an alleged massive fraud scheme related to cryptocurrencies. Police said that the suspects operated over a long period of time, “in cooperation and in a systematic manner, while defrauding investors in a number of projects in the field of cryptocurrencies.”

Law enforcement said each suspect “pocketed millions of shekels, while making false presentations to potential investors to invest in seemingly profitable ventures.”

According to court documents, Hogeg is suspected of 21 offenses, including money laundering, theft, and fraud, as well as crimes entailing sexual and moral turpitude currently under gag order.

Earlier this month, a well-known model said that Hogeg sexually assaulted her years ago, when she was 17. Channel 13 cited the model saying Hogeg entered her hotel room and tried to force himself on her, but she managed to fend him off. Hogeg denied the accusation and said the sexual interaction was consensual, adding that he had taken a lie detector test confirming his version.

The arrests Thursday came after about a year of police investigation led by the Lahav 433 anti-corruption unit into Hogeg’s alleged wrongdoings. Police reportedly dubbed the investigation “The Big Game,” according to the Kan public broadcaster.

Authorities said the alleged cryptocurrency fraud scheme was “systematic and sophisticated” and was meant to swindle investors out of millions of dollars, after they were presented with clear but false plans to fund certain initiatives. The money ended up being pocketed by the suspects for their own personal use or to back other business interests, according to the court documents.

Lawyers representing Hogeg said in a statement Thursday that he “vehemently denies the suspicions against him and is cooperating fully with investigators.”

Hogeg’s many companies

Hogeg began his journey as an entrepreneur over a decade ago with the short-lived startup Web2Sport, which allowed soccer fans to watch a live match and make decisions in real-time about what the players should do next, effectively crowd-sourcing the role of the team’s coach. The startup lasted about a year, but attracted several wealthy and prominent investors among them Alon Carmel, a founder of JDate, Israeli businessman Danny Rubinstein, and Easyforex, one of Israel’s first forex companies, according to previous reporting by The Times of Israel.

Over the years, Hogeg showed a knack for attracting high-profile investors and celebrity endorsements.

In 2010, he launched the now-defunct mobile photo and video-sharing website Mobli, which investors hoped at the time would pose a serious competition to sites like Vine (also defunct) and Instagram (now a Facebook/Meta company). Even though it ultimately failed to gain widespread adoption, Mobli attracted prominent investors as well, including, reportedly, tennis star Serena Williams, Mexican billionaire Carlos Slim, US actor Leonardo DiCaprio, and Kazakh businessman Kenges Rakishev.

(Rakishev gained prominence in 2007 when he brokered a deal for Kazakh oligarch Timur Kulibayev, the son-in-law of Kazakh President Nursultan Nazarbayew, to buy the home of Britain’s Prince Andrew for a reported £15 million, said to be £3 million over the asking price.)

In 2012, Rakishev and Hogeg launched a venture capital fund that later became known as Singulariteam, which at one point was one of Israel’s most active investment funds. According to its online portfolio, the fund invested in about three dozen companies, some still active, some not.

The fund also invested in startups co-founded or led by Hogeg, including Invest.com, Sirin Labs, Yo, as well as Mobli.

Invest.com became linked to Israel’s fraudulent binary options industry, according to a 2018 petition, when a 2017 planned merger between Invest.com and Israeli binary options company AnyOption went awry. Former shareholders of AnyOptions alleged at the time that Hogeg systematically robbed the company of its assets and profits in such a way that the firm, which should have been highly profitable, became insolvent and could not cover its basic operating costs. Hogeg then countersued AnyOption in a Cypriot court. The case has since been settled.

In 2016, Hogeg’s Sirin Labs unveiled what it called a highly secure, “military grade” smartphone called Solarin with a whopping $17,000 price tag for so-called high-end clients. The phone was unveiled at a star-studded event in London that year.

After the hype died down, Sirin Labs, for which Hogeg served as president, unveiled the Finney phone at a more modest $1,000 – $2,000 depending on specifications. The phone was touted as an open-source, secure device with an in-house operating system, SirinOS, and cold (offline) crypto wallets. Sirin Labs tapped Hong Kong-based mobile phone manufacturer Foxconn International Holding (FIH) to make the phones.

The company signed soccer star Lionel Messi as a brand ambassador and later in 2017 raised about $158 million from investors across the world in an ICO (Initial Coin Offering) that was later alleged as a scam by former employees.

Another two ICOs, for Stx Technologies Limited (Stox) and Leadcoin, which raised another $100 million, were also alleged to be scams.

(An Initial Coin Offering is a form of fundraising where a startup, instead of issuing shares to the public, issues a special token, or digital coin, that can be used within that company’s platform to access goods and services. The startup thereby acquires both users and funding, and the hope is that if the startup is successful, the value of the token will rise on secondary markets, enriching its holders.)

In August 2018, Hogeg bought Beitar Jerusalem, one of Israel’s top soccer teams, for $7.2 million, coming full circle with the soccer-related initiatives. The purchase put him further into the spotlight as he sought to change the culture surrounding the club, known for its racist anti-Arab factions among its fans. He later faced backlash from these factions when, in 2020, he said he was selling a 50 percent stake in the club to Sheikh Hamad bin Khalifa Al Nahyan, a member of Abu Dhabi’s ruling family. Al Nahyan pledged to pump $90 million into the team in the coming decade. But following an investigation into the Emirati’s finances, the deal fell through.

Legal troubles started in early 2019 when a Chinese cryptocurrency investor filed a NIS 17 million lawsuit (about $4.6 million) in Israel against Hogeg and Stox, alleging that Hogeg misappropriated millions of dollars worth of cryptocurrency invested in the company. The case was sent for arbitration in Gibraltar.

Later in 2019, two American investors sued Hogeg and claimed he lured them into investing in Mobli under false pretenses. The plaintiffs said that the company had used DiCaprio’s investment as a media gimmick “to lure and underhandedly persuade potential investors, like the plaintiffs and others, to buy shares at inflated prices

In their suit, the plaintiffs complained that media reports in Israel and abroad regularly described Hogeg as a “financial wizard” and a rising star in the startup world, when, in fact, they alleged, “he has been caught in the act in this and in other scandals and has been revealed to be a dangerous actor and a serial failed entrepreneur who has caused grievous damage to the plaintiffs and other investors to the tune of many hundreds of millions of shekels.”

At one point, Hogeg donated $1.9 million to Tel Aviv University to establish a blockchain research institute. He also founded the Alignment Blockchain Hub, a company that would help develop blockchain early-stage projects.

A separate lawsuit in 2019 brought by a Seattle-based investor, also against Stox and Hogeg, was later dismissed by a US judge.

But the lawsuits kept coming. In 2020, Hong Kong phone maker Foxconn International Holding, tapped to make the Finney phone, also sued Hogeg, demanding some $6 million in compensation for unpaid bills. The lawsuit claimed that despite the much-vaunted launch and the celebrity endorsements, just 10,000 units of the Finney phone were ever made by FIH. It is not clear how many were ever sold.

In May of this year, Hogeg was served with a $16.1 million lawsuit by former employees at Singulariteam. The plaintiffs alleged Hogeg had fooled them into thinking that the Sirin Labs, Stox, and Leadcoin ICOs were legitimate, and, as a consequence, they invested their own money and persuaded family and friends to invest in the three startups. They claimed to have suffered financial damages and psychological trauma as a result.

Hogeg denied (Hebrew link) the allegations and said the lawsuit was an attempt by disgruntled employees to extort him.

Hogeg has been in police custody since his arrest on Thursday.