When a religious leader stood before a hotel roomfull of Muslims four years ago and endorsed investment in a Chicago real-estate developer as complying with Islamic law, businessman Nadeem Sharafi decided to invest.
Little did he know that his efforts to use his money according to Islamic guidelines and avoid earning interest would lead him and his wife to lose more than $115,000, Sharafi said.
The Shariah Board of America’s approval of investing in Sunrise Equities led dozens of other Chicago-area Muslims—mostly Indians and some Pakistanis—to invest and lose hundreds of thousands of dollars with the company, which says it developed multiunit residential buildings in Chicago, the investors said.
Investors said they don’t know if the company suffered losses because of the declining real estate market or for other reasons. Salman Azam, an attorney hired by several investors, said Sunrise’s Chief Executive Officer Salman Ibrahim has not been seen since August. Sunrise’s offices off Devon Avenue are closed. At his home, mail spills out of his mailbox.
Neither Ibrahim nor his attorneys could be reached for comment Monday and Tuesday. Another principal in Sunrise, Amjed Mahmood, declined to comment, saying he had been a vice president in the company and the “corporation had gone down.” He said he lost $500,000 and was now driving a taxi.
Last week, 150 investors filed an involuntary bankruptcy petition in U.S. Bankruptcy Court, hoping to freeze Sunrise’s assets, but they stand to recoup little of the more than $50 million in losses, Azam said.
“He was just handing out unsecured promissory notes,” Azam said of Ibrahim. “They were not backed by anything. They had no security interest attached to them. He was conducting business like he was in South Asia.”
Sharafi said he’s as upset with his religious leaders as he is with Ibrahim.
“We’re Muslims,” said Sharafi, 60. “We heard the word of the mufti or ulemma [religious scholars], that this is right, that there’s no harm in it, so we started doing it.”
The religious scholars who endorsed Sunrise belonged to the Shariah Board, which provides conservative Muslims guidance on following Islamic law. Until a few weeks ago, Ibrahim also sat on the Shariah Board.
“What he did is a shock for us at this point,” said Syed Ali Farid, who is with the Shariah Board. “I know a lot of people who were set back 20 to 30 years with their life savings.”
Sunrise’s Web site says the company developed close to 100 residential units in Chicago and was working on an additional 250 units. The Shariah Board said it approved Sunrise because Ibrahim was not giving interest on people’s investments, but rather a profit over time. Islamic law bans Muslims from collecting interest on money.
Many invested more when they saw profit-sharing checks come in the mail every month. Others joined after seeing friends profit.
A former employee filed a lawsuit against Ibrahim last year, claiming misappropriation of funds.
“It’s too bad no one did due diligence, otherwise they would have found this case pending against him,” said Azam of the Lakeshore Law Group.
Last June, Fazal Mahmood, 52, took an Islamically sanctioned equity loan on his fully paid three bedroom home in Des Plaines to invest more money in Sunrise, he said. In all, he lost $200,000, his brother-in-law lost $250,000, and now Mahmood has to go back to making monthly payments on his home, he said.