WILLIAMSBURG — The Brooklyn developer who laid the groundwork for an explosion of residential properties along the Williamsburg waterfront ran a get-richer-quick real estate scheme for five years, conning a small group of Israeli investors out of more than $20 million, according to a Brooklyn federal lawsuit.
Williamsburg developer Yechezkel Strulovich and his Israeli business partner, Yechiel Oberlander, sweet-talked four well-heeled investors into sinking millions of dollars into 20 properties in Bushwick, Williamsburg, East New York, Bedford-Stuyvesant and Prospect-Lefferts Gardens, promising to fix up and manage the buildings and give the investors their money back in a matter of months, according to the suit filed on April 10. They also promised the funders a big cut of future profits.
Instead, the duo overcharged investors Jacob Schonberg, Binyomin Schonberg, Binyomin Halpern and Raphael Barouch Elkaim hundreds of thousands of dollars for each property and funneled the extra funds into 20 "secret properties," according to the suit filed on April 10. From those hidden assets, they collected all the rental income — an extra $90 million for themselves.
While the buildings Strulovich and Oberlander were supposed to be refurbishing sunk into neglect, accruing building violations and stop-work orders, the partners sent their investors fictitious updates to trick them into believing things were going according to plan, and to encourage them to invest in additional properties, the lawsuit charges.
The elaborate scam began in 2012, when Oberlander, a member of the small Orthodox Jewish community living in Israel, propositioned the four Israelis about investing in a series of Brooklyn properties, according to the suit.
They would see a full return on their investment within a matter of months, and they would reap 45 percent of the profits after that, Oberlander said, promising to take care of all the construction, renovation and property management needs.
Oberlander advertised his connection to Williamsburg developer Strulovich, whose "vision" for the Williamsburg waterfront in 1998 — which involved converting factories in loft apartments — led Crain's New York to anoint him as one of "Brooklyn's miracle makers."
But in purchase after purchase, Strulovich and Oberlander lied to the investors about the sale price of the properties they'd bought, the lawsuit claims. The two charged overcharged for properties at 901 Bushwick Ave., 106 Kingston Ave. 1213 Jefferson Ave., 369 Gates Ave., 853 Lexington Ave., and 14 other locations by hundreds and thousands of dollars, the investors later found out.
All that extra money supported their "lavish lifestyles" and paid off their personal debts, the complaint claims, although much of it appears to have been funneled into the 20 "secret properties" that Strulovich and Oberlander bought with cash and loans using the investors' properties as collateral, according to the suit.
Strulovich and Overlander led on their four marks with periodic payouts and photographs of construction sites as evidence of their project's progress, the lawsuit claims.
The duo intentionally took advantage of the four Israeli investors and "knew that they were not United States citizens or residents, knew they were unfamiliar with the complexities of New York real estate and construction," the lawsuit reads.
In truth, their actual properties were "languishing, unoccupied and unrenovated" and plagued with stop work orders, code violations and defaulted loan payments, the lawsuit says.
Take, for example, the commercial property at 73 Empire Blvd. in Prospect Lefferts Gardens, where the partners claimed they had paid $1M to secure control of the ground-floor commercial lease.
They actually paid far less than that, the lawsuit alleges, and they never made any repairs on the building, eventually losing a potential contract with Dollar Tree, because actual trees growing inside made the building structurally unsafe, according to the lawsuit.
Another building at 454 Central Ave. has an active stop work order, 23 open Department of Building violations and owes the city more than $130,000 in unpaid Department of Building fines, city records show. It has been cited over the years for tilting dangerously and for collecting hazardous garbage and debris inside and out, DOB violation records show.
The investors first became suspicious in the spring of 2016, after Strulovich and Oberlander took out additional mortgages on three properties they said had run out of money. Then, in February, they found out the duo was trying to sell two of their properties without telling them, raising red flags and prompting them to probe their other investments.
The investors' attorneys at Oved Law didn't didn't return a request for comment.
Judah Zelmanovitz, the attorney who represented the sales of several of the buildings, according to property records, couldn't be reached for comment.