Key facts
- Real estate investor Chaim Bialostozky is accused of mortgage fraud in Illinois, Connecticut, and Oklahoma.
- Nearly $44 million in mortgage debt is tied to properties he owns or recently owned that are in foreclosure.
- Lenders allege Bialostozky inflated secondary purchase prices to secure loans larger than the initial transactions.
- Fannie Mae filed a $6.2 million foreclosure suit against Yellow Portfolio Holdings LLC for three Chicago apartment buildings.
- Freddie Mac is foreclosing on Bialostozky's properties nationwide, including in Connecticut.
- Bialostozky has allegedly stopped making debt service payments and left properties with code violations and unpaid utility judgments.
Financial wreckage linked to New Jersey-based real estate investor Chaim Bialostozky has expanded from a Chicago crisis into a multistate mortgage fraud investigation. Bialostozky faces allegations in at least three states of defrauding loan originators by misrepresenting property transaction sizes to secure federally backed debts significantly larger than warranted.
Public records indicate that nearly $44 million in mortgage debt associated with real estate owned or recently owned by Bialostozky in Illinois, Connecticut, and Oklahoma is currently undergoing foreclosure proceedings. The majority of this debt is secured by multifamily properties in Chicago.
Bialostozky himself is reportedly liable for at least $25.5 million. An additional $18 million in debt is linked to a South Side Chicago apartment portfolio sold to an LLC managed by Israel Bialostozky, who public records show shares an address with Chaim Bialostozky.
The fraud allegations in the Connecticut, Chicago, and Tulsa cases are similar. Lenders accuse Bialostozky of orchestrating a scheme involving back-to-back property sales with an intermediary. By presenting inflated secondary purchase prices while hiding lower initial transaction prices from days or hours earlier, Bialostozky allegedly deceived lenders into issuing mortgages that covered his true costs, enabling him to acquire properties with no down payment and extract cash.
Fannie Mae recently filed a $6.2 million foreclosure lawsuit in Cook County Circuit Court against Yellow Portfolio Holdings LLC, managed by C. Yoseph Bialostozky. The suit targets 90 residential units across three South Side Chicago properties. The complaint states that debt service payments ceased in April, leading to significant building code violations and unpaid municipal utility judgments.
While Fannie Mae did not explicitly allege fraud in this specific filing, the property titles show similarities to those that have drawn fraud accusations against Bialostozky. For instance, he purchased the Maryland, Avalon, and Drexel avenue buildings from Avraham Levin shortly after Levin acquired them in June 2021, mirroring patterns seen in other portfolios where fraud allegations were made.
This Chicago lawsuit is part of a broader national effort by Freddie Mac to foreclose on Bialostozky's properties. On July 1, Walker & Dunlop filed separate foreclosure and fraud lawsuits in Waterbury, Connecticut, on behalf of Freddie Mac against Courtyard Apt Holdings LLC and Tower View Apt LLC, seeking recovery of outstanding debt on two apartment complexes.
Emergency receivership motions filed in late August indicate that Bialostozky also stopped making debt payments on his Connecticut properties in April. Since the legal actions began, Bialostozky has not responded to court filings or requests for comment from The Real Deal. Representatives for Fannie, Freddie, and Walker & Dunlop also did not respond to requests for comment.
Bialostozky is also reportedly leaving behind a trail of unpaid local vendors, including plumbing companies, drywall contractors, and real estate brokers, as revealed in footnotes of the Connecticut court filings.