U.S. securities regulators have charged an Orthodox rabbi from Chicago with cheating investors out of at least $10 million since 2014, some of it allegedly used to pay earlier investors in the manner of a Ponzi scheme.
In bringing the charges against Zvi Feiner, 49, the Securities and Exchange Commission said it has settled related charges against one of his business associates, Erez Baver. The SEC said Baver, 39, and a company he owns have agreed to pay $2.25 million in disgorgement and prejudgment interest, plus a civil penalty to be determined, without admitting or denying the allegations.
The charges involve Feiner’s creation of 20 limited liability companies to purchase nursing homes and assisted living centers. The SEC said Feiner, with Baver’s help, raised money from contacts in the Orthodox Jewish community, a Holocaust survivor being among them.
He promised the investments would be low-risk and generate high returns, when in reality he used the money to pay earlier investors, support other properties or for personal use, the SEC said.
Ariel Weissberg, Feiner’s attorney, said his client’s troubles grew from the financial collapse of one of his investments, Rosewood Care Centers, senior care facilities in Illinois and Missouri. Weissberg said an operator caused the failure. “Mr. Feiner didn’t have any role in causing the demise of the Rosewood facilities,” Weissberg said.
He said Feiner has been discussing a settlement with the SEC. “He recognizes he has an obligation to third parties and if at some time in the future he can make further payments he will diligently attempt to do that,” Weissberg said.
Rosewood defaulted on $146 million in mortgages guaranteed by the U.S. Department of Housing and Urban Development. The New York Times reported it was the biggest default ever for a HUD program that backs loans to nursing homes.
Weissberg said Feiner has settled two civil suits investors brought against him.
The SEC filed its charges Thursday in federal court here.