ShortJohnSilver
6th October 2015, 11:16 PM
The rest, and photos, at the link.
And Abe Foxman says anti-Semitism is just that people are "jealous of financial success" ... when swindlers like these 2 assholes walk the earth. BTW, the reason that they are in PR is probably because of the huge tax loopholes that living there affords.
Notice the racoon-nest like behavior, wrecked stuff just lying around, even though the guy is filthy rich.
http://www.bloomberg.com/news/features/2015-10-06/how-two-guys-lost-god-and-found-40-million
Abe Zeines’s hilltop mansion in Puerto Rico looks like a frat house after a rager. A wrecked golf cart blocks the driveway. An SUV with a blown tire sits on the grass out front. A porch overlooking the Caribbean is littered with beer bottles and cigarette butts.
It’s a Monday morning in June, and Zeines is lounging in boxer shorts in his living room, drinking a Blue Moon. Two girls in bikinis are cooking breakfast for him and Meir Hurwitz, his best friend and business partner. The men, natives of Brooklyn, N.Y., are complaining about the restaurants on the island they’ve decided to call home. “There’s no item called eggs,” Zeines says. “You have to get the eggs with ham, hold the ham.”
Several hours and about a case of beer later, Zeines and Hurwitz are giving a tour of the six-bedroom house. Zeines heads into his bedroom to show off the harbor view, but inside it’s dark. His two girlfriends have been fighting over the blinds, he says; one insists on blocking out the sun. Down the hall, Hurwitz produces a leather whip from a bedside drawer. When he shows it to the women he brings home, he says, they’re frustratingly blasé: “Maybe that’s just what they expect from a guy with a house like this.”
For Zeines and Hurwitz, their time in the promised land has turned out to be a little disappointing. Given the things they’ve seen, life’s long since lost the ability to surprise. With a pound of lox as a housewarming gift, I’ve come to their tax-haven sex mansion to hear their improbable story—how two sons of an ultrareligious Jewish neighborhood in Brooklyn witnessed the birth of a new kind of lending, made a fortune, and then saw it all come to an end. Not in the form of an FBI raid, but with Wall Street bankers paying millions to take over the action.
Zeines and Hurwitz made their money in a field that’s now called merchant cash advance. It’s a legal way to lend money to small businesses at interest rates higher than Mafia loan sharks once charged. Completely unregulated, last year it surpassed the U.S. Small Business Administration as a source of loans for less than $150,000, according to the industry newsletter DeBanked, one of the few places with reliable information. The business was developed a decade ago in a boiler room full of ex-Lubavitcher Jewish teenagers in downtown Manhattan. They figured out how to hook people such as florists and pizzeria owners with promises of fast cash and discovered just how ridiculous the profits could be—even if it meant driving their borrowers into bankruptcy.
Zeines was one of these guys. As I reported on the industry over the past year, he became my tour guide. A curly-haired 33-year-old with a cockeyed grin, he dresses like a tourist, in flip-flops and T-shirts, and speaks with a Brooklyn Yiddish accent that turns -ing into -ink. Zeines knows all the players and all the tricks to separate people from their money, but he styles himself an outsider, someone who appreciates the absurdities of Ivy League-educated financiers getting in on a seedy business.
Zeines kept telling me he was going to sell his company to a hedge fund for tens of millions of dollars. I didn’t believe him, but I told him if it ever happened it would make a good story. Then, one day this spring, I was shown a copy of a letter from Goldman Sachs. It was addressed to Zeines’s company. The bank was offering him $100 million.
---
In the Midwood neighborhood of Brooklyn, men in boxy black suits and black wide-brimmed fedoras speak in Yiddish under the elevated train. Young women block the sidewalk with double-wide strollers, wearing wigs to comply with a religious prescription for modesty. Zeines grew up here, the fifth of 10 children. His father worked as a wedding photographer. The family had so little money to spare that riding the subway was a treat.
All aspects of life were governed by religious rules. Never eat meat and dairy together. No electricity on Saturdays. Tie the left shoe before the right. High school meant Mir Yeshiva, an all-boys institution in the neighborhood. Zeines and other potential future rabbis pored over religious texts in Hebrew and Aramaic for hours each day in an unadorned auditorium full of wood desks evoking 19th century poverty. There was little instruction in math or English. Zeines was a good student, but as he got older, he started to feel as if adults cared more about the technicalities of religious laws than morals. He says he saw swindlers honored for their donations and fathers who could barely afford food buying pricey ceremonial artifacts to flaunt their piety. Zeines started breaking the rules. “The first cheeseburger,” he says, “was f---ing awesome.”
Zeines stopped his religious education and enrolled at Kingsborough Community College. There he met Hurwitz. Even though they’d grown up only minutes apart, they’d never crossed paths, because Hurwitz’s family followed a different rabbi. Zeines looked up to his new friend, who was two years older, 4 inches taller, and had seen the world—or at least more of it than he had. On a Birthright trip to Israel, Zeines got the nickname Bugsy, because he and Hurwitz were as tight as gangsters Bugsy Siegel and Meyer Lansky.
In 2005 they were working together at a group home for developmentally disabled adults, earning about $10 an hour. They liked the job but wanted a ticket out of Midwood. That November they found it, in the form of a fat, bald, flashy man named Sam Chanin.
Like Hurwitz, Chanin was raised in the Lubavitch sect, a Brooklyn-headquartered branch of Hasidic Judaism that sends adolescent boys into the streets to recruit Jews to the movement. People who’ve worked for Chanin say that, by the time he was in his 20s, he was using the persuasiveness he’d developed proselytizing to sell credit-card machines to stores door-to-door. It was a good business—salesmen got a cut every time a customer swiped a card—but once a neighborhood was saturated, it was hard to sell more.
To make extra money, some of the card-processing companies were beginning to make small, expensive loans to their customers on the side. Banks often reject small businesses as too risky to lend to. The card processors’ loans almost always got repaid, though, because they took a cut of transactions before a borrower even touched the money. Chanin realized there were lots of businesses that needed money so badly, they’d buy a credit-card machine just to get a loan. And in his old neighborhood, there were a lot of guys like him, who knew how to sell and would work on commission. (Chanin didn’t respond to questions sent to him via his lawyer.)
Hurwitz was one of the first Lubavitchers Chanin hired for his new cash-advance brokerage, which he named Second Source Funding. The business took off. At the group home, Hurwitz bragged to Zeines that he’d made more than $15,000 in his first month selling loans. That was all Zeines needed to hear. He bought a suit and a copy of the Wall Street Journal, and took the subway into Manhattan to join Second Source’s growing crew. It was January 2006, and he was 23 years old.
Zeines wasn’t an “always be closing” natural like Hurwitz, who was put in charge of all the other salesmen after a year. But at Second Source, anybody willing to pick up a phone and pitch could make thousands a week. The Orthodox gossip mill caught on. Word spread from the brownstones of Crown Heights to the leafy streets of Borough Park. So many kids were applying for jobs that Hurwitz started doing group interviews. “If you’re not making 20 grand a month, you just don’t belong here,” Hurwitz says he’d tell the applicants.
With no competition, Second Source could charge whatever it wanted. The standard deal it offered small businesses was to borrow $9,000 and pay back $120 a day for six months, or a total of $14,500, equivalent to an interest rate of 250 percent a year.That’s 10 times the legal limit in New York state, which made it a crime in the 1960s to charge more than 25 percent. To get around that, merchant cash-advance companies argue they aren’t actually charging interest—they’re buying the money businesses will make in the future, at a discount. As long as nobody uses the word “loan,” it usually holds up in court, says Robert Cook, a lawyer who advises the industry. Another no-no is chasing down an individual to collect if the business fails. Merchant cash advance is a supercharged version of “factoring,” the age-old practice of trading the right to collect unpaid bills in exchange for cash upfront.
At Second Source, the best customers were the most desperate. Often they were immigrants with poor English. Brokers bragged about their biggest rip-offs. For motivation, Hurwitz would tape $100 bills to the wall. Salesmen who weren’t cutting it would have their chairs taken away. “Why are you sitting on my chair,” Hurwitz would yell, “if you’re not making me any money?”
Brokers who had the knack made more money than they’d ever imagined. Some would shave their beards, put away their yarmulkes, and go out on the town after they got a few paychecks. Others discovered whiskey and cocaine. “Ridiculous amounts of money are coming your way,” says Dovid Sandomire, one of the salesmen. “It’s like, ‘Let’s go spend $1,000 at the strip club. It’s all on me.’ ” Chanin got a blue Bentley and a driver. Hurwitz bought a tall wooden throne for his office and a life-size statue of a lion.
Zeines went on trips to Atlantic City with the other brokers, but he was slower than some to join the debauchery. “As much as he was already rebellious,” says his brother Sholom, “he went into that office as a yeshiva boy.” It took Zeines more than two years of hawking loans for Second Source to move out of his parents’ house.
When the economy crashed in 2008, it was like somebody turned off the money spigot. Second Source depended on small credit-card-processing companies to fund its advances, and they started turning away borrowers. Chanin fired most of the salesmen. Hurwitz, who says Chanin bilked him out of $2 million in pay, went motorcycling across India. But Zeines wasn’t ready to get out of the game. If the processing companies wouldn’t put up their money anymore, he reasoned, why couldn’t he just lend out his savings?
Zeines teamed up for a time with a trader named David Glass, who’d just pleaded guilty to insider trading and was famous in the cash-advance industry for inspiring the 2000 movie Boiler Room. Glass recruited the brokers, and Zeines funded the advances with his Second Source earnings, at rates as high as 750 percent annualized. The money was so good, Hurwitz was lured back; after about a year, everyone tired of sharing the profit. The two friends broke up with Glass in 2011 and started their own company, called Pearl Capital, after the street their building was on.
----------------
And Abe Foxman says anti-Semitism is just that people are "jealous of financial success" ... when swindlers like these 2 assholes walk the earth. BTW, the reason that they are in PR is probably because of the huge tax loopholes that living there affords.
Notice the racoon-nest like behavior, wrecked stuff just lying around, even though the guy is filthy rich.
http://www.bloomberg.com/news/features/2015-10-06/how-two-guys-lost-god-and-found-40-million
Abe Zeines’s hilltop mansion in Puerto Rico looks like a frat house after a rager. A wrecked golf cart blocks the driveway. An SUV with a blown tire sits on the grass out front. A porch overlooking the Caribbean is littered with beer bottles and cigarette butts.
It’s a Monday morning in June, and Zeines is lounging in boxer shorts in his living room, drinking a Blue Moon. Two girls in bikinis are cooking breakfast for him and Meir Hurwitz, his best friend and business partner. The men, natives of Brooklyn, N.Y., are complaining about the restaurants on the island they’ve decided to call home. “There’s no item called eggs,” Zeines says. “You have to get the eggs with ham, hold the ham.”
Several hours and about a case of beer later, Zeines and Hurwitz are giving a tour of the six-bedroom house. Zeines heads into his bedroom to show off the harbor view, but inside it’s dark. His two girlfriends have been fighting over the blinds, he says; one insists on blocking out the sun. Down the hall, Hurwitz produces a leather whip from a bedside drawer. When he shows it to the women he brings home, he says, they’re frustratingly blasé: “Maybe that’s just what they expect from a guy with a house like this.”
For Zeines and Hurwitz, their time in the promised land has turned out to be a little disappointing. Given the things they’ve seen, life’s long since lost the ability to surprise. With a pound of lox as a housewarming gift, I’ve come to their tax-haven sex mansion to hear their improbable story—how two sons of an ultrareligious Jewish neighborhood in Brooklyn witnessed the birth of a new kind of lending, made a fortune, and then saw it all come to an end. Not in the form of an FBI raid, but with Wall Street bankers paying millions to take over the action.
Zeines and Hurwitz made their money in a field that’s now called merchant cash advance. It’s a legal way to lend money to small businesses at interest rates higher than Mafia loan sharks once charged. Completely unregulated, last year it surpassed the U.S. Small Business Administration as a source of loans for less than $150,000, according to the industry newsletter DeBanked, one of the few places with reliable information. The business was developed a decade ago in a boiler room full of ex-Lubavitcher Jewish teenagers in downtown Manhattan. They figured out how to hook people such as florists and pizzeria owners with promises of fast cash and discovered just how ridiculous the profits could be—even if it meant driving their borrowers into bankruptcy.
Zeines was one of these guys. As I reported on the industry over the past year, he became my tour guide. A curly-haired 33-year-old with a cockeyed grin, he dresses like a tourist, in flip-flops and T-shirts, and speaks with a Brooklyn Yiddish accent that turns -ing into -ink. Zeines knows all the players and all the tricks to separate people from their money, but he styles himself an outsider, someone who appreciates the absurdities of Ivy League-educated financiers getting in on a seedy business.
Zeines kept telling me he was going to sell his company to a hedge fund for tens of millions of dollars. I didn’t believe him, but I told him if it ever happened it would make a good story. Then, one day this spring, I was shown a copy of a letter from Goldman Sachs. It was addressed to Zeines’s company. The bank was offering him $100 million.
---
In the Midwood neighborhood of Brooklyn, men in boxy black suits and black wide-brimmed fedoras speak in Yiddish under the elevated train. Young women block the sidewalk with double-wide strollers, wearing wigs to comply with a religious prescription for modesty. Zeines grew up here, the fifth of 10 children. His father worked as a wedding photographer. The family had so little money to spare that riding the subway was a treat.
All aspects of life were governed by religious rules. Never eat meat and dairy together. No electricity on Saturdays. Tie the left shoe before the right. High school meant Mir Yeshiva, an all-boys institution in the neighborhood. Zeines and other potential future rabbis pored over religious texts in Hebrew and Aramaic for hours each day in an unadorned auditorium full of wood desks evoking 19th century poverty. There was little instruction in math or English. Zeines was a good student, but as he got older, he started to feel as if adults cared more about the technicalities of religious laws than morals. He says he saw swindlers honored for their donations and fathers who could barely afford food buying pricey ceremonial artifacts to flaunt their piety. Zeines started breaking the rules. “The first cheeseburger,” he says, “was f---ing awesome.”
Zeines stopped his religious education and enrolled at Kingsborough Community College. There he met Hurwitz. Even though they’d grown up only minutes apart, they’d never crossed paths, because Hurwitz’s family followed a different rabbi. Zeines looked up to his new friend, who was two years older, 4 inches taller, and had seen the world—or at least more of it than he had. On a Birthright trip to Israel, Zeines got the nickname Bugsy, because he and Hurwitz were as tight as gangsters Bugsy Siegel and Meyer Lansky.
In 2005 they were working together at a group home for developmentally disabled adults, earning about $10 an hour. They liked the job but wanted a ticket out of Midwood. That November they found it, in the form of a fat, bald, flashy man named Sam Chanin.
Like Hurwitz, Chanin was raised in the Lubavitch sect, a Brooklyn-headquartered branch of Hasidic Judaism that sends adolescent boys into the streets to recruit Jews to the movement. People who’ve worked for Chanin say that, by the time he was in his 20s, he was using the persuasiveness he’d developed proselytizing to sell credit-card machines to stores door-to-door. It was a good business—salesmen got a cut every time a customer swiped a card—but once a neighborhood was saturated, it was hard to sell more.
To make extra money, some of the card-processing companies were beginning to make small, expensive loans to their customers on the side. Banks often reject small businesses as too risky to lend to. The card processors’ loans almost always got repaid, though, because they took a cut of transactions before a borrower even touched the money. Chanin realized there were lots of businesses that needed money so badly, they’d buy a credit-card machine just to get a loan. And in his old neighborhood, there were a lot of guys like him, who knew how to sell and would work on commission. (Chanin didn’t respond to questions sent to him via his lawyer.)
Hurwitz was one of the first Lubavitchers Chanin hired for his new cash-advance brokerage, which he named Second Source Funding. The business took off. At the group home, Hurwitz bragged to Zeines that he’d made more than $15,000 in his first month selling loans. That was all Zeines needed to hear. He bought a suit and a copy of the Wall Street Journal, and took the subway into Manhattan to join Second Source’s growing crew. It was January 2006, and he was 23 years old.
Zeines wasn’t an “always be closing” natural like Hurwitz, who was put in charge of all the other salesmen after a year. But at Second Source, anybody willing to pick up a phone and pitch could make thousands a week. The Orthodox gossip mill caught on. Word spread from the brownstones of Crown Heights to the leafy streets of Borough Park. So many kids were applying for jobs that Hurwitz started doing group interviews. “If you’re not making 20 grand a month, you just don’t belong here,” Hurwitz says he’d tell the applicants.
With no competition, Second Source could charge whatever it wanted. The standard deal it offered small businesses was to borrow $9,000 and pay back $120 a day for six months, or a total of $14,500, equivalent to an interest rate of 250 percent a year.That’s 10 times the legal limit in New York state, which made it a crime in the 1960s to charge more than 25 percent. To get around that, merchant cash-advance companies argue they aren’t actually charging interest—they’re buying the money businesses will make in the future, at a discount. As long as nobody uses the word “loan,” it usually holds up in court, says Robert Cook, a lawyer who advises the industry. Another no-no is chasing down an individual to collect if the business fails. Merchant cash advance is a supercharged version of “factoring,” the age-old practice of trading the right to collect unpaid bills in exchange for cash upfront.
At Second Source, the best customers were the most desperate. Often they were immigrants with poor English. Brokers bragged about their biggest rip-offs. For motivation, Hurwitz would tape $100 bills to the wall. Salesmen who weren’t cutting it would have their chairs taken away. “Why are you sitting on my chair,” Hurwitz would yell, “if you’re not making me any money?”
Brokers who had the knack made more money than they’d ever imagined. Some would shave their beards, put away their yarmulkes, and go out on the town after they got a few paychecks. Others discovered whiskey and cocaine. “Ridiculous amounts of money are coming your way,” says Dovid Sandomire, one of the salesmen. “It’s like, ‘Let’s go spend $1,000 at the strip club. It’s all on me.’ ” Chanin got a blue Bentley and a driver. Hurwitz bought a tall wooden throne for his office and a life-size statue of a lion.
Zeines went on trips to Atlantic City with the other brokers, but he was slower than some to join the debauchery. “As much as he was already rebellious,” says his brother Sholom, “he went into that office as a yeshiva boy.” It took Zeines more than two years of hawking loans for Second Source to move out of his parents’ house.
When the economy crashed in 2008, it was like somebody turned off the money spigot. Second Source depended on small credit-card-processing companies to fund its advances, and they started turning away borrowers. Chanin fired most of the salesmen. Hurwitz, who says Chanin bilked him out of $2 million in pay, went motorcycling across India. But Zeines wasn’t ready to get out of the game. If the processing companies wouldn’t put up their money anymore, he reasoned, why couldn’t he just lend out his savings?
Zeines teamed up for a time with a trader named David Glass, who’d just pleaded guilty to insider trading and was famous in the cash-advance industry for inspiring the 2000 movie Boiler Room. Glass recruited the brokers, and Zeines funded the advances with his Second Source earnings, at rates as high as 750 percent annualized. The money was so good, Hurwitz was lured back; after about a year, everyone tired of sharing the profit. The two friends broke up with Glass in 2011 and started their own company, called Pearl Capital, after the street their building was on.
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