SEC Sues Operators of Investment Scheme Targeting the Orthodox Jewish Community in Chicago
Litigation Release No. 24605 / September 20, 2019
SEC v. Zvi Feiner, et al., No. 19-CV-06269 (N.D. Ill.)
The Securities and Exchange Commission has charged Zvi Feiner, a resident of Chicago, Illinois, his company FNR Healthcare, LLC (FNR), and Erez Baver, a former executive at FNR, with operating a fraudulent scheme targeted at investors in the Orthodox Jewish community in Chicago.
The SEC's complaint, filed September 19, 2019 in the U.S. District Court for the Northern District of Illinois, alleges that Feiner and FNR began soliciting funds from investors in 2010, including more than $10 million from at least 62 investors since 2014. According to the complaint, Baver assisted Feiner with raising funds for certain of these entities starting in 2014. The complaint alleges that investor funds were pooled together in limited liability companies that would purchase nursing homes and assisted living facilities throughout the Midwest, and, since 2010, Feiner and FNR raised funds for approximately twenty limited liability companies. The defendants are alleged to have told investors that the investments were low-risk and would generate high returns from the successful operations of the nursing homes and assisted living facilities. However, according to the complaint, the defendants misappropriated investor funds to, among other things, pay distributions to earlier investors, support other struggling properties, pay back loans taken out on other properties, and for their own personal use.
The complaint alleges that Feiner, Baver, and FNR Healthcare violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also names Baver's company, Cedarbrook Management, Inc. (Cedarbrook), and Feiner's company, Netzach Investments LLC, as relief defendants for the purposes of recovering investor funds that they received from the fraud.
Baver and Cedarbrook agreed to settle the charges without admitting or denying the allegations of the complaint. Baver consented to entry of a final judgment that permanently enjoins him from future violations of the securities laws, orders him to pay disgorgement and prejudgment interest of $360,776 and a civil penalty to be determined by the court upon motion of the SEC. Baver and Cedarbrook also have agreed to pay $1,892,958 in disgorgement and prejudgment interest, jointly and severally, reflecting Cedarbrook's ill-gotten gains from the fraud. The settlement is subject to Court approval.
The SEC's investigation was conducted by Michelle Muñoz Durk and Jerrold H. Kohn of the Chicago Regional Office, under the supervision of Jeffrey A. Shank. The litigation is being led by Eric M. Phillips and Michael D. Foster.