Irish to lose $250k in alleged Chicago property fraud

IRISH property investors have become embroiled in an alleged multi-million fraud that could see them lose hundreds of thousands of dollars.

The investors paid deposits on a development in Chicago that is unlikely to break ground following the disappearance of the property’s developer.

Castleroc Estates, the Dublin-based brokerage firm headed by Phillip Hegarty, has launched a legal action in an attempt to recover more than $250,000 (€184,900) in deposits.

This follows the disappearance of Salman Ibrahim, the chief executive of Sunrise Equities, the lead developer of the Pure 2.0 project in Chicago’s uptown district.

His disappearance has caused panic within the city’s Muslim community, as investors attracted by the Shariah-compliant real estate company face losses of $50m (€36.9m).

Financing was structured to avoid interest payments, barred under Shariah law.

State authorities in Illinois are now investigating Mr Ibrahim for alleged fraud. He disappeared in August.

Mr Hegarty also did business with Mr Ibrahim and Sunrise, marketing developments to Irish investors.

Castleroc launched the lawsuit against Mr Ibrahim and JP Morgan Chase Bank, which held the deposits in an account. According to the complaint, between November 2007 and January 2008, the Irish investors put down $256,150 (€189,450) to secure the purchase of 16 units in the 18 storey building for a total price of nearly $4.9m (€3.6m).

Bank records show the account is empty, Castleroc’s lawyer Thea Pazen told a Chicago business magazine.

The scandal is another blow to Irish investors attracted to US developments. Recent months have seen the sharp downturn in property values continue and a strengthening dollar.

Pure 2.0 was marketed as an eco-friendly development and followed a similar one in the West Loop district in the centre of the city.

Castleroc was also involved in marketing the original Pure development — which is not yet complete — to Irish investors.

While there is some concern for the future of the building, it is almost finished. A former Sunrise sales director Suzy Grossman said the development is moving forward.

“Everything is proceeding along. The building is 95% done and we are going along as normal,” she said.