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'Subject To Religious Law': Brooklyn Condo Project Dispute Spills Into Bankruptcy Court

427 Marcy Ave., a condo development in Brooklyn subject to bankruptcy and foreclosure disputes.

A bankruptcy filing laden with sensational allegations of fraud has delayed the foreclosure sale of a South Williamsburg condominium development.

Lender DW Partners began foreclosure proceedings in 2021 on developer Ezra Unger, claiming he had failed to meet payments on a $31M loan provided for a 25-unit condo at 427 Marcy Ave. However, a sale set for Jan. 17 was halted at the eleventh hour by a bankruptcy filing, The Real Deal reports. 

The holdup came when a partner on the project, Aron Lebovits, filed for Chapter 11 bankruptcy protection for the entity that controls it, 425 Marcy Avenue LLC — despite the fact that the entity is registered to Unger, TRD reported. Lebovits claimed in an affidavit that Unger “over a number of years, systematically looted” the property by “using a series of fraudulent and forged documents, and operating a sophisticated shell game using a myriad of limited liability companies.”

Lebovits claims he is the real owner of the property at 427 Marcy Ave. and had operated his bakery there for many years. In the bankruptcy filing, Lebovits said he was hoodwinked into handing it over to Unger after he, “a baker by trade with little real education,” was lured into it “through lies and manipulation."

He said he only gave Unger a 49% ownership in 427 Marcy Ave. on a “temporary basis” and the agreement had been that the stake would revert back to Lebovits “for a nominal fee of $100 when a certain project was completed.” Ultimately, he claims the mortgages taken out on the property were done so fraudulently and loans were issued without Lebovits’ knowledge.

The $31.5M loan from DW Partners, he said, is unsecured and fraudulent. Further, he has pulled a separate Cincinnati project in as an affiliate in the bankruptcy filing because he claims Unger stole money from him and put it into the deal.

Unger's attorneys wrote the bankruptcy judge and said the dispute should be resolved in religious court.

“The investor agreements are sworn to before God, subject to religious law, and may only be interpreted and contested in the religious courts known as the Beth Din,” Morrison Cohen attorneys Latisha Thompson and David Scharf wrote in a filing, according to TRD.

Lebovits has taken both DW Partners and Unger to court, accusing Unger of taking advantage of “simple people without any real education," according to TRD. The filing also lists several people and entities, including Congregation Beis Nusen, that helped to fund Lebovits' legal fees. A bankruptcy expert told TRD he had "never seen that before."

South Williamsburg is an epicenter of the Hasidic Jewish community, corners of which have drawn legal scrutiny in recent years for its schools failing to provide adequate education while receiving government funding.

A judge had previously agreed to hold off the foreclosure sale, per TRD, but resumed after Lebovits failed to pay a $1.5M bond. An injunction attempt from Lebovits in December was denied, but the bankruptcy filing has put the sale on hold.