CHICAGO (Reuters) – Three men defrauded 300 Muslim investors and three banks out of $44 million in a real estate Ponzi scheme that promised profits, not interest, to adhere with Shariaa law, federal prosecutors said on Wednesday.
Salman Ibrahim, 37, and Mohammad Akbar Zahid, 59, claimed that Sunrise Equities Inc earned monthly profits on real estate investments, not interest, in the alleged scheme that took in a total of $69 million from 2003 to 2008, according to a federal indictment unveiled by the U.S. attorney’s office in Chicago.
But Sunrise was not generating any profits, and existing investors were being paid off with contributions from newer investors, according to the indictment.
Sunrise’s owners lured hundreds of Pakistani-American Muslim investors in Chicago and around the United States with promises of annual returns of 15 percent to 30 percent that they claimed were compliant with Shariaa, or Islamic law, according to the indictment.
“This is the first time in Chicago that an alleged fraud scheme has been uncovered that used a pillar of Islam to induce potential victims to invest their funds,” Robert Grant, the FBI’s top agent in Chicago, said in a statement.
Some investors were persuaded to refinance their homes and sink the proceeds into Sunrise, according to the indictment.
The accused made allegedly false statements about their net worth and about planned real estate projects to secure $29 million in bank loans from Mutual Bank, Cole Taylor Bank and Devon Bank that were not repaid, according to the indictment.
Some of the funds were used to operate a motorcycle parts manufacturing company in Pakistan, a gas station in a Chicago suburb, and a medical equipment sales company in Chicago, the indictment said. Other funds went to build a home and an Islamic school, pay for leases on personal cars, make home renovations, and to pay off a defendant’s mortgage.
Ibrahim and Zahid were each charged with seven counts of fraud and one count of bank fraud. They are believed to be living abroad and are being sought, authorities said.
Each count of fraud or bank fraud carries a maximum sentence of 30 years in prison and a $1 million fine on conviction..
A third owner of Sunrise, Amjed Mahmood, 47, whose title was senior vice president of construction, was arrested and charged with one count of conspiracy to commit mail, wire and bank fraud.
The charge carries a maximum penalty of five years and a $250,000 fine.