FILED: KINGS COUNTY CLERK 05/08/ :32 AM INDEX NO /2017 NYSCEF DOC. NO. 106 RECEIVED NYSCEF: 05/08/2018

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS HEZI TORATI : Index No /2017 : Plaintiff, : AMENDED : ANSWER AND -against- : COUNTERCLAIMS : YOSSEF HAZUT, et al. : : Defendant. : : DEFENDANT, Yossef Hazut, by his attorneys, Paul T. Vink, PC, as and for his Amended Answer to the Amended Complaint and counterclaims, alleges as follows: 1. Denies knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraphs 1, 7, 8, 29, 30, 31, 32, 33, 34, 44, and 45 of the Amended Complaint. 2. Denies the allegations set forth in paragraphs 3, 4, 5, 9, 10, 11, 12, 13, 14, 17, 18, 19, 21-27, 36, 37, 42, 43, 46-61, 65-72, 76-80, 82-91, 93-96, , , , , , , , and In response to the allegations set forth in paragraph 6, admits that Defendant is a partial owner of limited liability companies which own real property in Kings County, but except as specifically admitted, denies the allegations set forth therein. 4. In response to the allegations set forth in paragraph 16, admits that Defendant invested in the "Wright Litigation", but except as specifically admitted denies the allegations set forth therein. 1 1 of 15

2 5. In response to the allegations set forth in paragraph 35, admits that Defendant was a 50% owner in Skygate 014 LLC, and except as admitted denies knowledge or information sufficient to form a belief as to the truth or accuracy of the allegations set forth therein. 6. In response to paragraphs 38-41, neither admit nor deny the allegations, but refer to the documents referenced for their terms, conditions, and legal effect, if any. AS AND FOR A FIRST AFFIRMATIVE DEFENSE 7. Plaintiff's claims are barred by the doctrines of waiver, laches, and/or estoppels. AS AND FOR A SECOND AFFIRMATIVE DEFENSE 8. Failure to mitigate damage. AS AND FOR A THIRD AFFIRMATVE DEFENSE 9. Plaintiff's claims are barred by the doctrine of unclean hands. AS AND FOR A FOURTH AFFIRMATIVE DEFENSE 10. Any damages suffered by Plaintiff were solely the fault of Plaintiff's own actions and not as a result of any culpable conduct on the part of Defendant. AS AND FOR A FIFTH AFFIMATIVE DEFENSE 11. Plaintiff's claims are barred by the statute of frauds. AS AND FOR A SIXTH AFFIRMATIVE DEFENSE 12. Plaintiff lacks the legal capacity to sue and maintain the within action. AS AND FOR A SEVENTH AFFIRMATIVE DEFENSE 13. This action cannot proceed in the absence of necessary parties. 2 2 of 15

3 COUNTERCLAIMS BACKGROUND FACTS 14. In or about September, 2016, Plaintiff Torati ("Torati") solicited Defendant Hazut ("Hazut") to invest money in Torati's real estate holdings. 15. Torati represented that he and limited liability companies owned by him were owners of several properties in the New York City area, and were on the verge of being sold for substantial profit, needing only limited investment to complete construction and renovations. 16. Hazut is an inexperienced small business owner, without real estate investment experience. 17. Torati is a businessman who represented that he had substantial experience in real estate investment and renovation, and represented that he had a history of successfully "flipping" renovated, distressed properties. He was currently involved in a number of projects, and due to his expansion, was "cash poor" and having trouble raising the cash to complete the various projects. 18. Torati therefore offered Hazut an opportunity to obtain a good return on investments with what was originally to be a limited investment. 19. Unfortunately, at the time, Hazut did not know Torati was a con man pushing classic ponzi schemes based on false representations and valuations, and improperly siphoning invested funds for his personal use. Hancock Street 20. Hazut agreed to invest in the property located at 410 Hancock Street, Brooklyn, NY (" Hancock" ("Hancock"). To that end, Torati directed that Hazut wire transfer $70, to Greengrove 3 3 of 15

4 LLC, an entity owned by Torati, representing his investment and purchase of one half of the interest in Hancock, to be used in the purchase and renovation of the property. Hazut did so. 21. Hazut asked why the funds were being wired to Greengrove, when Hancock was actually owned by an entity known as Skygate 014, LLC. Torati advised that he used Greengrove as an operating account and would pay the bills from that account. 22. Hazut did not authorize the Hancock investment funds being used for anything other than renovations in the Hancock property. Jewel Street 23. Thereafter, Torati solicited Hazut to invest in other properties, including real (" Jewel" property at 34A Jewel Street, Brooklyn, New York ("Jewel"). 24. Torati represented that he had an interest in the property, and that he anticipated profits of over $1,000, upon the completion of renovations to the Jewel property. 25. Hazut agreed to invest in Jewel, paying $130, for a 50% interest in the project plus an additional $70, for renovations, which amount was to be paid back before any other payments were made. Over time, Hazut paid Torati an additional $300, directed for renovations of Jewel, which was to be repaid upon the sale or refinance of Jewel, prior to any distribution of profits. 26. As with Hancock, Torati directed that the funds be wired to the account of Greengrove, to be used in the purchase and renovation of the property. 27. After the investment was made, in addition to the purchase amount and loan intended for renovations, Torati demanded an additional $100, allegedly used for renovations for Jewel, to complete the project. 4 4 of 15

5 28. Hazut paid the additional amounts demanded by Torati, bringing his total investment and loans on the property to over $300, Upon information and belief, Torati used the funds for unauthorized personal expenses, and not for the renovation of the property. Dean Street 30. While Hazut was waiting for these projects to be completed and his investment to pay dividends, Torati showed him yet another project, at 686 Dean Street, Brooklyn, NY (" Dean" ("Dean") 31. Torati represented that he was in the process of gaining title to Dean, and offered Hazut a 50% interest in exchange for $115, Hazut accepted, and as directed by Torati, Hazut obtained a $19, check payable to Greengrove, LLC, to be used in the purchase and renovation of the property, and made additional wire transfers and payments to Greengrove for the balance. 32. Upon information and belief, Torati never had or acquired an interest in Dean, but used the amounts paid by Hazut for other, unauthorized expenses. Saddle River, New Jersey and Jupiter, Florida 33. While all this going on, Torati introduced Hazut to James Caparro, who owned properties at 31 Old Woods Road, Saddle River, New Jersey and Bay Street, Jupiter, Florida (the Caparro properties"). 34. Torati represented that the Caparro properties were in foreclosure, and that Caparro would pay $1,000, to assist in saving the properties. 35. Upon this representation, Hazut paid $10, to an attorney as directed by Torati to conduct due diligence and complete the transaction, and an additional $30, to 5 5 of 15

6 Torati, to be used in the purchase and renovation of the property, which Torati deposited, again, in the Greengrove LLC account. 36. Upon information and belief, Torati never had any deal with Caparro, and never used the funds to purchase an interest in the Caparro properties. 37. Instead, Torati used the funds for unauthorized purchases and expenses without the consent of Hazut. Putnam Avenue 38. Simultaneously, Torati showed Hazut property located at 1102 Putnam Avenue, Brooklyn, New York ("Putnam"), a property which Torati represented that he was about to purchase and was in the process of being renovated. Torati represented that the property would be quickly completed and "flipped" for a substantial profit. 39. Torati and Hazut agreed that Hazut would invest $100, for a 50% interest in Putnam, to be used in the purchase and renovation of the property. Again, Hazut paid this amount by transfer to Greengrove LLC at the instruction of Torati. 40. Upon information and belief, neither Torati nor his various entities had or has ever had an ownership interest in Putnam. 41. Upon information and belief, Torati used the amount paid by Hazut for other, unauthorized expenses. Milburn Avenue 42. In or about the same time, Torati indicated that he was in negotiations to purchase the property at 48 Milburn Avenue, Hempstead, NY, ("Milburn") which was also a distressed property. 6 6 of 15

7 43. In reality, Torati had already purchased the property for $1,000.00, and flipped a 50% interest to Hazut for $20,000, which was paid to the title company and a law firm at Torati's instruction. 44. After the investment in Milburn, Torati insisted additional funds were needed, and 50% of the interest was thereafter sold to a third party for $70, Torati received those funds and failed to use them to improve the property. 45. Torati further demanded additional sums from both Hazut and the third party, claiming they were necessary for the renovation of Milburn, but failed to use the additional funds for renovation of Milburn, using the funds for personal expenses instead. 46. The agreement between the parties further provided that Hazut would be the managing member of an LLC to be formed for the renovation and sale of Milburn. While the LLC was upon information belief formed, and Hazut named as managing member, Torati engaged in self dealing and acted as managing member, excluding Hazut. 47. Upon information and belief, Torati has sold the Milburn property without providing an accounting or share of net profits to Hazut. 48. Fountain Avenue 49. In or about the same time, Torati represented that one of his companies, STI Realty LLC, owned or was about to own the property located at 224 Fountain Avenue, Brooklyn, NY (" Fountain" ("Fountain"). 50. Torati and Hazut agreed that Hazut would receive a 50% interest in the Fountain property as further security for his continued investments and loans for renovations on the other properties. 7 7 of 15

8 51. Despite the agreement, Torati has never provided an appropriate accounting, nor paid Hazut any profits on the Fountain property. 52. Upon information and belief, Torati used the amount paid for personal and other unauthorized expenses. The Wright Litigation 53. In addition to the real estate investments, Torati was also involved in purchasing interests in litigation. That is, providing money to personal injury plaintiffs in exchange for a (' Wright" percentage of the ultimate award. One such individual was Robert Wright ('Wright"). 54. Prior to meeting Torati, Hazut had never heard of such an investment. Torati insisted that the investment was secure, but as with the real estate, he was "cash poor", and needed a flow of cash to fund the investment. 55. Wright is the plaintiff in a wrongful death action pending in Pennsylvania. Torati or one of his companies had purchased a 50% interest in the recovery from Wright, and Torati asked that Hazut take on half that position. 56. Hazut agreed to pay 50% of the expenses in exchange for 50% of the position, or 25% of the ultimate award. 57. To that end, Torati directed that Hazut transfer $30, to Greengrove LLC, which Hazut did. 58. Thereafter, Torati and Hazut were to pay 50% each of monthly expenses of $5, due to Wright under the contract. Hazut made the payments required. 59. Rather than receiving the entire monthly payment, Wright then asked that, Hazut and Torati lease a vehicle for Wright's use, with the costs being deducted from the monthly payments. It was agreed that Torati and Hazut would jointly lease a BMW for the personal use 8 8 of 15

9 of Wright. Hazut made arrangements for the lease, and has paid for the lease and insurance without reimbursement from Torati. 60. Torati has never documented any expenses paid by him with respect to Wright. Instead, Torati has attempted to avoid Hazut's investment, and "steal" the proceeds of the Wright litigation without compensation to Hazut. Additional moneys loaned 61. In addition to the direct investments, Hazut has loaned Torati and the various Limited Liability Companies that were involved over $800, for use on the various projects. Torati has not paid back a penny of those loans. These loans were above and beyond the investment purchase price. 62. Further, as a loan, Hazut agreed to lease a 2017 Range Rover for Torati's personal use. Torati was required to pay all costs involved in the leasing. Hazut was to be reimbursed any out of pocket expenses. 63. In addition to the Range Rover, Hazut agreed to lease a 2017 Mercedes for the personal use by Torati's wife. Again, Torati was required to pay all costs involved in the leasing. Hazut was to be reimbursed any out of pocket expenses. 64. Torati has failed and refused to make payments on the Range Rover and Mercedes, damaging Hazut's credit rating and costing Hazut substantial fees and penalties. Hazut has been forced to make payments on the vehicles, which are in his name and secured by his credit, due to the failure of Torati to make payments on either vehicle. 65. Torati has refused to return the vehicles despite not making payments required, and despite due demand, exposing Hazut to substantial potential liability. 9 9 of 15

10 66. Between September, 2016 and May, 2017, Hazut has invested over $1,500, with Torati, and has seen not a penny in return. 67. Instead, Torati has, inter alia: a. attempted to sell properties in which Hazut is an investor without making payment to Hazut; b. refused to provide any accounting of the amounts invested and spent; c. failed and refused to pay for the leased vehicle; d. failed and refused to pay expenses relating to the properties and the Wright litigation; and e. commingled funds and used them for his own purposes. 68. Upon information and belief, Torati has engaged in similar fraudulent schemes for at least 10 years, defrauding scores of individuals. FIRST COUNTERCLAIM (Fraud) 69. Defendant repeats and realleges each and every allegation set forth in paragraphs 15 through 68 as if fully set forth herein at length. 70. Torati made numerous representations as set forth above. 71. Hazut justifiably relied upon those representations. 72. The representations by Torati were false, and were known to be false by Torati when made. 73. Torati obtained investment funds from Hazut under false and fraudulent pretenses of 15

11 74. Hazut has been damaged by the false representations of Torati in an amount to be determined by the Court of at least $1,500,000.00, plus interest thereon at the legal rate. 75. This is not the first time Torati has engaged in fraudulent schemes. 76. Upon information and belief, Torati has numerous times over the last ten or more years engaged in this fraudulent scheme against the general public. 77. Hazut is thereby entitled to an award of punitive damages in an amount to be determined by the Court of at least $5,000, SECOND COUNTERCLAIM (Conversion) 78. Defendant repeats and realleges each and every allegation set forth in paragraphs 15 through 68 as if fully set forth herein at length. 79. Torati misappropriated funds of Hazut, using funds for purposes other than those agreed and designated by the parties. 80. Upon information and belief, Torati used funds for his personal use, and transferred funds overseas to avoid them being repatriated and repaid to Hazut. 81. Torati did not have the consent of Hazut to use the funds for any purpose other than the designed real property investments and renovations. 82. Hazut has been damaged by the conversion of Torati in an amount to be determined by the Court of at least $1,500,000.00, plus interest thereon at the legal rate. 83. Upon information and belief, Torati has engaged in this fraudulent conduct against the general public. Hazut is thereby entitled to an award of punitive damages in an amount to be determined by the Court of at least $5,000, of 15

12 THIRD COUNTERCLAIM (Unjust Enrichment) 84. Defendant repeats and realleges each and every allegation set forth in paragraphs 15 through 68 as if fully set forth herein at length. 85. Torati received over $1,500, for the purpose of purchase and renovation of real estate. 86. Torati has used the amount received to his personal benefit. 87. It would be inequitable for Torati to retain the funds to the detriment of Hazut, who legitimately expected a return on his investment and fair dealing by Torati. 88. Torati has been unjustly enriched to the detriment of Hazut in an amount to be determined by the Court of at least $1,500,000.00, plus interest thereon. FOURTH COUNTERCLAIM (Breach of Contract) 89. Defendant repeats and realleges each and every allegation set forth in paragraphs 15 through 68 as if fully set forth herein at length. 90. By failing to make payments based on the investments in the various properties, Torati has breached the various agreements between the parties. 91. Hazut has been damaged in an amount to be determined by the Court of at least $1,500,000.00, plus interest thereon. 92. Upon information and belief, Torati has refused to pay 50% of the ongoing costs of the Wright litigation. 93. The refusal of Torati to make continued payments constitutes a breach of contract by Torati with respect to Wright, and threatens the continued viability of the Wright contract of 15

13 94. By his breach of the contract, Torati has forfeited any right to proceeds in the Wright litigation, and Hazut is entitled to a declaration from the Court to that effect. 95. In the alternative, Hazut has been damaged in an amount to be determined by the Court of at least $500,000.00, plus interest thereon, and demands judgment therefore with respect to the Wright litigation. 96. In addition, Torati is in breach of this agreement to make payment on the leased vehicles and otherwise reimburse Hazut for funds loaned in excess of the investment payments. 97. Hazut has been additionally damaged in an amount to be determined by the Court of at least $250,000.00, plus interest thereon. FIFTH COUNTERCLAIM (Accounting) 98. Defendant repeats and realleges each and every allegation set forth in paragraphs 15 through 68 as if fully set forth herein at length. 99. Hazut invested specific funds for use on specific projects Torati commingled those funds, and used the funds on project not related to the investments and for his own personal expenses Hazut is entitled to an accounting of the funds received by Torati and used by Torati. SIXTH COUNTERCLAIM (Imposition of Constructive Trust) 102. Defendant repeats and realleges each and every allegation set forth in paragraphs 15 through 68 as if fully set forth herein at length Torati was in a fiduciary relationship with Hazut, and owed Hazut all duties attached to said relationship of 15

14 104. Torati promised Hazut equity interests in the various properties which are the subject of these counterclaims, to wit: the Hancock Street, Jewel Street, Dean Street, Putnam Avenue, Milburn Avenue, and Fountain Avenue properties, as well as the proceeds of the Wight Litigation Hazut transferred substantial sums to Torati in reliance upon receiving these equity positions Torati has breached the agreements between the parties and violated his fiduciary obligations Torati has been unjustly enriched by his actions, to the detriment of Hazut Accordingly, Hazut is entitled to a constructive trust on the properties and the proceeds of the Wright litigation, and demands judgment enforcing that trust, 109. In furthance of the constructive trust, Hazut requests that this Court require that any and all proceeds from the sale or refinance of any of the properties, or the settlement of the Wright Litigation, be held in escrow pending the resolution of this action. WHEREFORE, Defendant Yossef Hazut demands judgment as follows: a. Dismissing the claims of Plaintiff in their entirety; b. On the first counterclaim granting Hazut judgment in an amount to be determined by the Court of at least $1,500, plus interest thereon, plus an award of punitive damages in the amount of $5,000,000.00; c. On the second counterclaim granting Hazut judgment in an amount to be determined by the Court of at least $1,500, plus interest thereon, plus an award of punitive damages in the amount of $5,000,000.00; of 15

15 d. On the third counterclaim granting Hazut judgment in an amount to be determined by the Court of at least $1,500, plus interest thereon; e. On the fourth counterclaim granting Hazut judgment in an amount to be determined by the Court of at least $1,750, plus interest thereon, and declaring the Torati no longer has an interest in the Wright Litigation, or in the alternative of at least $2,250,000.00; f. On the fifth counterclaim directing that Torati account for the amounts received by him, including all expenses paid for each of the properties; g. On the sixth counterclaim, imposing a constructive trust on the identified properties and the proceeds of the Wright Litigation, and h. Granting Defendant such other, further, and different relief as the Court may deem just and proper. Dated: White Plains, NY May 8, 2018 PAUL T. VINK, PC Attorneys for Defendant Hazut By: Paul/ T. VE Paul T. Vink, Esq. 200 Mamaroneck Ave., Suite 500 White Plains, NY paul.vink@vinklaw.com of 15