From Durban to Rikers Island: Jewish entrepreneur’s fall from grace

Eran Eyal seemed destined for success: a head for business, a love of technology, insatiable ambition, a charming personality, and extreme intelligence. But all this may be what led to his downfall. When he realised that his start-up dream wasn’t going to succeed, he simply reached for more.

Fooling investors and everyone else in his life, he stole and lied shamelessly until the bubble burst and he was arrested in New York City. He spent three weeks at the notorious Rikers Island prison surrounded by rapists and murderers before being released on bail of $250 000 (R3.7m).

How did he get to this point? A new book, At Any Cost: The South African fraudster who took the tech world for more than $40 million by Stephen Timm tells the full story of how a nice Jewish boy who was born in Israel and grew up in Durban, came to be investigated, arrested, charged, and eventually deported. South African business leader Michael Jordaan describes the book as “an age-old narrative about ego and flying too close to the sun as well as a modern version of greed in the tech world”.

When Eyal was released from Rikers Island, it was one of the few times he responded to communication from Timm, who was covering the story at the time. “Literally been through hell. Rikers Island is no picnic. Been sleeping next to murderers and rapists,” he wrote over Facebook Messenger, adding that he was in a cell with 50 other people during those three weeks.

Timm has covered Eyal’s story from the very beginning when he was still the darling of the tech start-up sector in South Africa. Eyal’s first company, Springleap, began as a crowdsourcing platform for t-shirt designs, and then pivoted into a conduit for clients to access thousands of creative professionals.

“When he started Springleap, I think that was meant to be the big ‘Silicon Valley start-up’,” says Timm. “When that didn’t happen, he brazenly committed fraud by paying a Bulgarian hacker a few dollars to ‘web-scrape’ 180 000 profiles, which he then told investors were the company’s network.”

Eyal would go on to employ similar strategies for two more companies, Passo and Shopin. And it worked, because no one looked too closely. The media reported on his success without questioning it, and investors threw money at him without asking what he was doing with it. The result was that he lived his dream: a trendy New York apartment, spending $500 000 (R7.4m) of investor funds on rent, shopping, entertainment, and a dating service. “He was so set on having this lifestyle that he even fooled his landlord about how much was in his investment account,” says Timm.

New York authorities responded to complaints, and began to investigate him, eventually pouncing in August 2018, when he was charged with stealing $600 000 (R8.8m).

“I started writing about it as part of my job [editor at Ventureburn, a South African online publication that covers the start-up sector], but then I really got into the story. It epitomises a big problem in the tech start-up sector globally – the ‘fake it till you make it’ syndrome. Eran’s story represented the dark side of this industry,” says Timm.

“And he was such a nice guy, that I had to keep going to understand where these allegations were coming from. The more involved I got, the more I could see that it was plain and simple lying, that he twisted everything. And he had been doing it for years. So it really is a detective-type story. It reads like a movie.”

From his interactions with Eyal and from what he heard from others, “He’s a really charming person. Very well spoken, intelligent, a gentle soul. No one saw it coming, because he would take you in. Like others who have committed fraud, he convinced all these people to part with their money. Investors say he has the gift of the gab.

“Those who knew him at school – he went to Carmel College – said he always had a way with people. Sometimes I would reach out to acquaintances who would initially respond but then wouldn’t come back to me, maybe because they themselves didn’t believe he could get convicted of fraud.”

Timm says Eyal was born in Israel and came to Durban with his family when he was very young. He is one of three siblings, and “I think a key thing that motivated him is that he has a successful brother, Avi Eyal, who has done really well in the tech and start-up sector. That could be the reason that he wanted success at any cost and to be like his brother, who he looked up to.”

Timm thinks that because Eyal worked so hard and made so many sacrifices, he felt that success was owed to him. “And he also began to believe his own lies. Because he worked so hard and hardly ever slept, he was always on edge. He was close to breaking. He saw the things he did as ‘white lies’ that were excusable because he was suffering so much to build a massive, successful company.

“A lot of this goes on in the tech sector because it allows people to hide behind things. You don’t have a proper product, it’s still being developed, so you can lead people along. And your worth is based on how much money you can raise. So it’s about who is able to pitch the best, and he was highly talented at that.”

Eyal was eventually convicted in December 2019 in a New York court of defrauding investors of millions of dollars through three investment schemes. He pleaded guilty to all charges. He wasn’t jailed, but as part of his plea agreement, he has to refund $600 000 (R8.8m) to four Springleap investors he defrauded. He also had to step down as chief executive of Shopin, and was banned from raising capital or serving in any position of authority in any New York business for three years. Investigators were able to find only $450 000 (R6.6m) of the $42.5m (R628m) Eyal raised in an initial coin offering for the Shopin start-up, and he was ordered to return that amount to the four Springleap investors.

In his sentencing on 26 February 2020, Eyal was told that he would have 48 hours to leave the United States. He was deported to Israel in May of that year. There are already reports that he has travelled to the United Kingdom to see his girlfriend. Many believe he got off lightly. Timm isn’t sure what his next steps will be, but fears he could fall into his old ways, especially in the ‘start-up nation’ that is Israel.

Timm was there when Eyal was sentenced and deported. “They brought him in with his legs and hands shackled. He was wearing a white yarmulke and holding a small Torah. He’s never been a practicing Jew, so I’m not sure if it was to receive benefits in custody, or maybe he was trying to change his life. But you could see he was a man in turmoil. I felt sorry for him.”