A Minnesota home seller and financier have been found guilty of violating state law in a scheme that targeted East African Muslims in deceptive real estate deals that promoted “Sharia compliance.”
After a two-week trial in downtown Minneapolis, a jury Monday afternoon sided with Minnesota Attorney General Keith Ellison’s office in a civil suit that claims Chadwick Banken intentionally deceived homebuyers through a complex process known as a “deed deed.” Mr. Ellison’s office said the unusual real estate deal generated huge profits for Mr. Banken and his company, while financially ruining his clients.
Through these predatory deals, Banken sold homes to Muslim buyers at high markups and on worse terms than traditional home sales, and lured customers into risky deals through the promise of the American Dream of homeownership, the state’s attorneys argued.
“Chad Banken took advantage of people’s willingness to sacrifice for this dream,” Assistant Attorney General Kartik Raman said in opening arguments.
The seven-person jury deliberated about eight hours over two days before finding Banken and several of his companies civilly liable for violating the Minnesota Human Rights Act. The jury also found that Banken violated the state Consumer Financial Protection Act in two ways, in addition to the Consumer Fraud Act and the Uniform Deceptive Trade Practices Act. The latter four verdicts are considered advisory, and a judge will make a final decision based on these counts.
The court will also decide whether to order restitution to victims or impose other penalties, including fines of up to $25,000 for each violation, along with forfeiture of benefits.
The lawsuit, filed in Hennepin County District Court, follows a 2022 investigation by ProPublica and the Sahan Journal that found a growing market for contract-by-deed home sales in Minnesota, where homebuyers pay sellers in installments directly. Many buyers in Minnesota’s vast Somali community argue that paying interest violates their Islamic beliefs. They often relied on investors like Banken, who bought homes and resold them to people who bought through deed programs, as a way to buy “interest-free” homes.
But lawyers in Mr. Ellison’s office say that in some cases Mr. Banken hid interest amounts or made unusually large down payments in advance. The attorney general’s complaint alleges that Banken used inflated home prices, confusing paperwork and six-figure balloon payments at the end of short-term contracts to force buyers into default and ultimately retain ownership of the properties.
Some customers have sacrificed far more than they understood when they signed the paperwork. They lost their life savings and home, unknowingly violating their religious principles in the process. One person testified that he ended up homeless and living in his truck.
“I’m not saying Mr. Banken wanted these deals to fail — he’s not saying that — but he certainly was indifferent,” Assistant Attorney General Mark Iris told jurors in closing arguments last Thursday.
Banken sold 160 homes using deed contracts and offering “creative financing” targeting Muslims and buyers with poor credit scores. Mr. Ellison called Banken’s deed contract scheme “one of the worst I’ve seen.”
Throughout the trial, Mr. Banken’s attorney, Jack Pearce, said Mr. Banken was an honest businessman who offered alternative financing only to people who were ineligible for or opposed to traditional options. He said Banken would buy homes selected by customers, flip them the same day, and charge a markup for a profit.
“Some people didn’t make it,” Pearce told jurors. “It’s a shame. It’s a shame. That’s life. Sometimes things don’t work out.”
Pearce said Banken was not to blame for the failure. He said his clients’ real estate agents were responsible for introducing them to his program, filling out the paperwork and explaining the terms, and that he was only at the end of the process. Pearce said potential buyers approached Banken, but Banken simply presented them with a menu of options, rather than the other way around. Pierce said it’s up to the customer to decide which one they want.
“Is that a mistake?” Mr Pearce asked the jury. “Are we going to punish someone who offered someone else the opportunity to buy a home with the option they wanted?”
Lawyers for the state countered that Banken did not give buyers an informed choice and that customers, including those whose first language was not English, did not understand what they were agreeing to when they signed contracts. In some cases, clients were given a price and were surprised to find out it would cost much more at the end of the process.
Abdinour Yigal, 40, was one of the customers who suffered losses through Banken’s program. Igal, a long-haul truck driver who ran his own small business, testified through an interpreter that a real estate agent told him he could buy a home interest-free through Banken’s Shariah-compliant program.
Igal, whose story was also featured in a report in ProPublica Sahan Journal, said he put down $20,000 in 2022 to secure a home in suburban Lakeville that was originally said to cost about $638,000. He said he had second thoughts when he started seeing documents showing the cost was $727,000, but was told he would lose his down payment if he declined.
Then I realized that a large portion of my monthly payment was going toward interest. When Igal realizes that the contract he signed is not what he thought, he calls Banken for an emergency meeting, stating that he needs to sell the house and exit immediately.
“Put it on the market like you would sell it,” Igal wrote in an email provided to the jury. “I don’t want to be your slave.”
Unable to get out of the deal, Yigal ultimately paid $170,000 and walked away, according to the complaint. The financial damage was so devastating that he had to send his children back to live in Africa while he rebuilds his savings, he said.
“I was homeless and living in my truck for a year,” Igal told jurors.
After the verdict, Igal said he was “very satisfied” with the outcome.
“At least justice was served for me and my children,” he said.
