Pagaya investor seeks $1.8 million refund, claiming AI real estate fund wiped out up to 80% of capital
Zwi Williger, controlling shareholder of Willi-Food, claims Pagaya presented the AI-driven U.S. housing fund as a conservative, low-risk investment.
Businessmen do not usually disclose private investments that have gone wrong, preferring instead to absorb losses away from the public eye. However, a sharply worded letter sent by the attorney of Zwi Williger, controlling shareholder of Willi-Food, to Pagaya reveals the depth of the disappointment surrounding the company’s real estate fund, which, according to the claims, has wiped out as much as 80% of investors’ capital. Williger is now demanding the return of the $1.8 million he invested in the fund, which he says was presented to him as a conservative, low-risk investment.
According to Williger, a representative of Pagaya approached him in Israel in 2021, when the real estate fund was launched, and described it as a conservative investment vehicle that was not leveraged and did not rely on debt. He now claims it has become clear that the actual results are far removed from those representations. Pagaya’s real estate fund uses the company’s AI technology to identify residential properties in the United States that are supposedly priced below market value and therefore represent attractive investment opportunities. The fund reportedly owns approximately 1,400 residential properties across the U.S.
According to the fund’s documents, it focused on investments in single-family homes in the American market based on criteria designed to maximize returns relative to risk. These included purchase prices ranging from $150,000 to $450,000, capitalization rates of at least 4%, properties with a minimum of three bedrooms and two bathrooms, and homes built from 1980 onward.
The fund is currently in an advanced stage of its lifecycle and remains locked to investors until the end of 2027, with a possible extension through 2029.
Despite its reliance on artificial intelligence, Calcalist revealed earlier this year that the fund had already recorded a decline of nearly 40% in the value of its assets since launch, including a 24% drop during the first three quarters of the year alone.
According to a letter sent by attorney Dan Tzuk, the situation has deteriorated even further. “As a result of leverage and other factors that were not disclosed to my clients, substantial losses have accumulated,” the letter states. “According to the fund’s own recent reports, the expected return to investors is now only 20 to 30 cents on the dollar, reflecting losses of 70% to 80% of the original investment.”
In practical terms, the claims suggest that the fund, which raised approximately $730 million at inception, has lost between $510 million and $580 million.
Williger claims that the fund was originally presented as generating annual returns of 10%-15% over a period of up to four years, while being characterized as “very low risk.” However, he argues that a retrospective examination of the prospectus and the fund’s data revealed that it was, in fact, a leveraged and risky investment vehicle.
He further claims that the fund “has no relative advantage over comparable funds” and that representations regarding the use of artificial intelligence amounted to “marketing slogans lacking real substance or added value.”
Williger is demanding the return of his investment, plus interest, within 14 days from the date the letter was sent.
Over the past five years, Pagaya has significantly shifted its business focus. Rather than concentrating on fund management, the company has increasingly emphasized debt securitization activities and credit solutions for companies, an area in which it has expanded partnerships with institutional investors and banks. Today, fund management reportedly accounts for only 2%-3% of Pagaya’s overall business activity.
Pagaya responded: “We completely reject the claims made in the letter, which was sent to the media and was never received at the company’s offices. Mr. Williger is acting opportunistically and attempting to disregard the clear terms to which he agreed. The fund has been managed rigorously and according to institutional standards, with full transparency and sufficient time given to all investors to evaluate the investment before joining the fund.”
