The 47% Markup That Gutted 1,200 Families

For eight years, a company called EquityBuild, Inc. sold a story. It was a story of safe, passive income, of building wealth through the stability of brick-and-mortar real estate. Jerome and Shaun Cohen, the father-son duo behind the operation, promised individual investors secured, high-return investments in residential properties, mostly on Chicago’s South Side. They promised financial security. What they delivered was a Ponzi scheme that funneled money from new victims to old ones, creating an illusion of success while they skimmed millions off the top.

When the house of cards collapsed in 2018, the scale of the rot was exposed. More than 1,200 notes were left unpaid. Nearly $75 million in payments were delinquent. Families who had invested their savings saw it all vanish. And in the aftermath, as a court-appointed receiver tried to salvage what little was left for the victims, a larger, more sophisticated financial player, Shatar Capital Partners, stepped in to argue that its multi-million dollar loan should be paid back first, leaving the small-time investors with nothing.

This is the story of that fight, documented in the records of the United States Court of Appeals. It’s a story of a predatory business model, willful blindness from professional financiers, and a small victory for the people who were lied to from the very beginning. The court’s decision hinged on what Shatar should have known; what red flags it chose to ignore. The evidence shows they ignored plenty.

The Non-Financial Ledger

The court documents list cold, hard numbers: $75 million in delinquent payments, 1,200 unpaid notes, a 47% markup. These figures outline the architecture of the fraud. They do not, and cannot, measure the human cost of such a profound betrayal. The promissory notes sold by EquityBuild were pitched as secure investments. They were backed by real property, a tangible asset you can see and touch. This wasn’t a volatile stock or an abstract digital currency; it was a home, a rental property, a piece of a neighborhood. This appeal to physical security is a powerful lure, especially for those seeking stable returns for retirement, for their children’s education, or simply for a buffer against economic precarity.

Imagine being one of those investors. You hand over your savings, earned over years of labor, trusting the polished presentations and legal-looking documents. You receive statements showing your investment earning 12%, 15%, even 20% returns. For a time, it feels like you made the right choice. It feels like success. Then, in August 2018, you receive a video email from Shaun Cohen admitting it was all a lie. He confesses that the interest payments you received were just money taken from newer investors. The entire business model, he admits, “was no longer sustainable.” The floor falls out from under you. The security was an illusion. The property you thought secured your future was a prop in a long-running theatrical production of theft.

“EquityBuild’s activities bore the hallmarks of a Ponzi scheme, in which fraudsters secure funds from new investors to repay earlier investors, creating the illusion of high returns.”

The trauma extends beyond the initial loss. It seeps into the long, grueling process of receivership. The victims, already stripped of their capital, are then pitted against one another and against larger institutional players like Shatar Capital Partners in a grim battle for the scraps. The receiver’s job is to liquidate the remaining assets and distribute the proceeds, but there is never enough to make everyone whole. The process forces victims to relive the fraud, to document their losses, and to watch as lawyers and courts decide who gets what percentage of their stolen money back. The promise of a passive investment becomes an active, agonizing, and prolonged legal struggle.

This is the true weight on the ledger. It is the destruction of trust, not just in one company, but in the systems that are supposed to protect people from such predation. It is the sleepless nights, the anxiety, the forced revision of life plans. For over a thousand families, the Cohens didn’t just steal money; they stole peace of mind and the belief in a secure future. They replaced it with the harsh reality that even when an investment is supposedly backed by a physical home, the real foundation can be nothing but sand.

Societal Impact Mapping

Economic Inequality

At its core, the EquityBuild scheme was a wealth extraction machine designed to transfer money from a large pool of smaller investors to its two founders. The court documents reveal the stunning efficiency of this machine: on average, the Cohens collected 47% more from investors than was needed to purchase the properties. That excess cash, the “difference,” was not reinvested or held in reserve. The Cohens simply kept it, retaining between 15% and 30% of all funds invested. This is a direct siphoning of community wealth into private pockets, exacerbating economic inequality with every fraudulent transaction.

The scheme preyed on the desire for financial stability. By offering returns of 12-20%, EquityBuild targeted individuals shut out of more exclusive, high-return investment circles, offering them what seemed like a golden opportunity. In reality, it was a trap. The court filings show that between January 2015 and February 2017, the company generated only $3.8 million in actual property revenue while paying out $14.5 million in interest to investors. This impossible ratio, funded by new investor money, is the mathematical signature of a system that produces no real value and exists only to enrich its creators at the expense of its participants.

Public Health

The collapse of a financial scheme of this magnitude carries severe public health consequences. The over 1,200 investors who were left with unpaid notes and delinquent payments totaling nearly $75 million did not just suffer a financial loss; they endured an immense psychological shock. The sudden revelation of betrayal and the evaporation of life savings are significant sources of acute and chronic stress, which is a known contributor to a host of physical and mental health problems, including anxiety, depression, hypertension, and cardiovascular disease.

The illusion of security, carefully crafted by the Cohens with promises of investments “fully secured by real property,” was a critical part of the deception. When that illusion was shattered by Shaun Cohen’s video confession, it triggered a crisis of trust and stability for thousands of people. The subsequent legal battle over the remaining assets, pitting victims against institutional lenders, only prolongs this stress. Financial ruin is a public health crisis in slow motion, eroding the well-being of individuals, families, and communities long after the headlines fade.

Environmental Degradation

The EquityBuild portfolio consisted primarily of residential properties on Chicago’s South Side. When a Ponzi scheme that owns and “manages” a large number of properties collapses, the physical assets are often the first casualty. With EquityBuild’s operations halted and its assets frozen by the SEC in August 2018, the properties entered a state of limbo under a receivership. The primary goal of the receiver is to liquidate assets for the benefit of victims, not to engage in long-term property management or community development.

This situation creates a significant risk of property neglect and urban blight. Maintenance is deferred, repairs go unmade, and properties can sit vacant for extended periods during the lengthy legal process. This physical decay directly impacts the surrounding neighborhoods, potentially lowering property values for other residents and contributing to a decline in the quality of the local environment. The financial fraud perpetrated in a boardroom thus manifests as tangible decay on city streets, with the residents of these communities bearing the environmental burden of a scheme they had no part in.

Legal Receipts

The court records are not just opinions; they are a collection of evidence. This evidence, from emails to financial data, paints an undeniable picture of fraud and willful ignorance. Here are the direct receipts from the court’s decision.

“In the 25-month period from January 2015 to February 2017, the Cohens collected only $3.8 million in revenue from the properties while making $14.5 million in interest payments to investors.”

“In August 2018, Shaun Cohen admitted in a video emailed to EquityBuild’s noteholders that the company had used later investments to fund interest payments to earlier investors, and the business structure was no longer sustainable.”

“EquityBuild also inflated the properties’ values, collecting on average 47% more from investors than was needed to purchase the properties. That difference allowed the Cohens to retain 15 to 30% of the funds invested.”

The case against Shatar Capital Partners hinged on what they knew and when they knew it. The court found they were on “inquiry notice”—they knew enough facts that a prudent person would have investigated further. Their own emails became Exhibit A.

An email from Shatar’s principal, Ezri Namvar, to EquityBuild shows he understood the risks: “Since we have become aware of your business structure, assuming your previous deals have been closed with cro[w]dfunding investors, we need to make sure your re[f]inancing of already closed deals are allowed and kosher[.]”

Despite this awareness, Namvar later testified that he never reviewed the standard lender documents EquityBuild sent him in response.

When a title company employee emailed that EquityBuild would receive $86,000 cash back from a property closing, Namvar replied: “What??? I thought the borrowers are putting over 1.5 mil in to close the purchases[.] Can someone explain this 2 me?”

This email shows direct knowledge of a highly unusual transaction. A borrower receiving a large sum of cash at closing, when they are supposed to be bringing money to the table, is a massive red flag. The court concluded that Shatar had a responsibility to investigate these anomalies. Their failure to do so cost them their claim to priority.

The Predatory Markup

This is the engine of the fraud. For every dollar needed to actually buy a piece of property, the Cohens took in roughly $1.47 from their pool of unsuspecting investors. This 47-cent surplus was their slush fund. It paid for their lifestyle, it paid the “interest” to earlier investors to keep the scheme running, and it represented a direct theft of capital that should have been building equity for the people who provided it. This wasn’t a fee, a commission, or a cost of doing business. It was a predatory markup hidden from view, a parasitic tax on the trust of their victims.

What Now?

The court’s decision affirmed that the individual investors who were lied to have priority over a sophisticated financial firm that ignored clear warning signs. This is a small measure of justice. However, the architects of the scheme and the system that allowed it to flourish for nearly a decade demand further scrutiny.

Key Individuals

• Jerome Cohen: Co-founder of EquityBuild, Inc.
• Shaun Cohen: Co-founder of EquityBuild, Inc. Admitted to the Ponzi scheme structure in a video to investors.
• Ezri Namvar: Principal of Shatar Capital Partners, the firm that was found to be on “inquiry notice” of the fraud.

Regulatory Watchlist

These are the agencies whose mandate is to prevent and prosecute this kind of fraud. Their effectiveness is a constant matter of public debate and vigilance.

The Path Forward

Legal victories are necessary, but they are not sufficient. The core problem is an investment system that is opaque, complex, and tilted in favor of insiders. The path forward requires a shift in power back to communities.

Support local organizing and mutual aid networks that build community wealth and resilience outside of predatory financial systems. Advocate for stronger consumer protections and demand that regulatory agencies like the SEC are fully funded and empowered to aggressively pursue financial crime, not just after a collapse, but before thousands of families are ruined. Scrutinize every promise of high, “guaranteed” returns, especially in real estate. Real security is built on transparency and collective well-being, not on the secret ledgers of a Ponzi scheme.