From $3.7M to $9.9M: Federal probe focuses on 42 Baltimore homes sold again and again

Federal prosecutors appear to be closing in on a real estate investment scheme by a small group of New York businessmen who used loosely regulated commercial loans to quickly build a massive portfolio of rowhomes in Baltimore.

A complaint filed last week in the U.S. District Court of Maryland accuses Alexander Schultz, a real estate wholesaler, and Jacob Rappaport, a Towson-based attorney, of misleading lenders.

According to court records, Schultz previously pleaded guilty to a count of bank fraud conspiracy in 2024, and his sentencing has been delayed multiple times since; the new bank fraud conspiracy charge against Rappaport, meanwhile, was filed as a document called a criminal information, which can signal a forthcoming guilty plea.

An April 22 hearing for Rappaport has been scheduled.

The complaint also details unnamed actors who orchestrated and benefited from the fraudulent business dealings. No one else has been charged with a crime.

The scheme outlined in the complaint centers on 42 homes in East Baltimore that prosecutors say were bought and sold at intentionally inflated prices. Property records show the homes sold for $3.7 million, then $6.9 million, then finally $9.9 million less than a year later in 2022.

That’s when those same 42 homes were sold to Zahav Ventures, a limited liability company controlled by Eluzer Gold of Spring Valley, New York.

The Banner previously identified Gold and Benjamin Eidlisz, who are linked to the same office in Spring Valley, as the chief architects of a troubled Baltimore real estate portfolio.

There is no evidence available in public records that would explain the 42 homes’ sudden surge in value. It is illegal to perform significant renovations on a home in Baltimore without a city permit, and only two of the homes had permits pulled for renovation or construction work since their acquisition in 2021. Today, almost all of the homes are in foreclosure.

Federal prosecutors say these rapidly escalating sale prices were a mirage created to “scheme and defraud.”

Rappaport did not respond to a request for comment, and a representative for Schultz declined to comment. Gold also did not respond to multiple requests for comment. Eidlisz declined to answer questions.

“I have no idea what you’re talking about,” he said Monday when reached by phone.

The New Yorkers’ collection of more than 700 homes, which includes the 42 identified in the new court documents, has left lenders, Wall Street investors and life insurers facing tens of millions of dollars in losses.

Their use of commercial loans in Baltimore is being scrutinized by city government officials, who have opened an investigation into possible fair housing violations. Industry insiders have publicly slammed the New Yorkers’ activity as a blatant example of fraud, and Baltimore Mayor Brandon Scott labeled it as fraudulent.

The case naming Schultz, and later Rappaport, is the first indication that a broad criminal probe could be ramping up.

Starting a year ago, real estate industry insiders noticed a wave of foreclosure filings in Baltimore against the same few companies connected to a circle of New York buyers. Mortgage lenders panicked as the foreclosures proliferated and none sold at auction, which indicated they had been systematically overvalued.

In the aftermath, private lenders, who are increasingly seen as a part of the solution to Baltimore’s vacant home epidemic, have mostly pulled out of the city. Maryland government and civic leaders have noted that the foreclosures are complicating their efforts to rehabilitate low-income neighborhoods.

The tenants who have rented these homes, like Diana Scott, question what the investors did with their rent payments. Scott, her husband and their three children live in one of the 42 East Baltimore rowhomes at the center of the federal investigation.

For the past six years, Scott’s family has lived through multiple ownership changes and landlords. Scott, who works for an organization that helps people with addiction, is anxious about the fate of her house — and wonders how quickly her family needs to find a new place to live.

Prosecutors, in the lawsuit, say Schultz and Rappaport’s scheme kicked off in late 2021.

It alleges that Schultz and an unidentified business partner agreed in September 2021 to buy the collection of properties for about $3.7 million, or about $88,000 apiece, and looked to quickly sell them to another buyer for about $4.7 million, or roughly $112,000 each. But property records reflect that the deal, on paper, instead went through for $6.9 million.

Prosecutors allege that Schultz and his associates falsely inflated the deal to get a bigger loan. They then wired proceeds of the sale from the seller to the buyer to cover the down payment, prosecutors say.

Prosecutors allege that Rappaport oversaw transfers of money in and out of an attorney trust account.

Public records show a company controlled by a Spring Valley resident named Bentzion Schwartz, called 2239 McElderry MD LLC, purchased the 42 rowhomes in December 2021 for $6.9 million, or about $164,285 per house. Attempts to reach Schwartz were not successful. State records show that he formed his LLC a month before the settlement date.

That LLC went on to sell the homes in smaller batches less than a year later to Zahav Ventures for around $9.9 million, or around $235,000 apiece. The two consecutive deals were financed with loans from a subsidiary of the New York City-based Roc Capital, property records show.

The complaint notes that the lender considered the “true purchase price” and the down payment essential to its decision to provide the loans and alleges that the investors withheld key information. Property and court records show Roc Capital has since sold those loans to other Wall Street investors.

John Perilli, a spokesperson for the company, declined to comment.

Roc Capital originated more loans than any other lender to finance the New Yorkers’ portfolio, according to records reviewed by The Banner, amounting to at least $35 million. Its co-founder Eric Abramovich said at an industry convention in November that there are widespread problems stemming from the appraisal industry that have enabled faulty deals — but he stopped short of calling out Baltimore.

In the complaint, prosecutors outline a similar price scheme involving an apartment building in Southwest Baltimore called Coventry Manor that Schultz and associates bought in 2020 for nearly $5.5 million.

Property records show they sold it to a new buyer in 2022 for $7.8 million, though prosecutors allege the sale price was actually $6.9 million, unbeknownst to the bank financing the transaction.

All told, prosecutors say Schultz received about $665,000 in proceeds from the transaction and Rappaport received about $16,000.

Banner reporter Justin Fenton contributed to this article.