Some Chicago-area residents are wondering whether the popular home flipping business is a bad business model or a Ponzi scheme, as iFLIP Chicago has been the subject of multiple lawsuits alleging it lured inexperienced investors into predatory lending.
The loans had a devastating economic impact on dozens of Chicago-area families.
Ameera Hamid, an emergency physician, is passionate about home renovation and said flipping houses is something her mother always wanted to do.
Hamid was one of the people who became interested in iFLIP Chicago.
“If you want to learn how to actually flip houses and you want to actually do it, we have over 25 years of experience in this business,” Ramo Bay said in a Facebook video for his business, iFLIP Chicago.
In late 2020, videos like this one from iFLIP Chicago caught Hamid's attention.
“iFLIP Chicago Bootcamp is 100% hands-on, rigorous, but so much fun,” Bey said in an iFLIP Chicago Facebook video.
Hamid, whose cousin co-founded iFLIP Chicago, said this seemed like a great opportunity.
“Who wouldn't trust their family?” Hamid said.
iFLIP Chicago hosts “boot camps” on how to flip homes and offers “joint venture” partnership opportunities for people who are ready to invest in their own flips.
“Social media can give a person instant credibility,” Tatiana Barnett, a real estate agent who enrolled in the iFLIP bootcamp in 2021, told NBC Chicago.
Barnett had previously run his own property flipping business in Indiana, but felt he could learn something from the Bays.
“There were a lot of people who had done somersaults with him, so I decided to at least take a class,” Barnett said.
After completing the boot camp, both women said they were approached by Ramo Bey and asked to join iFLIP's joint venture program.
The program was supposed to provide participants with some upfront capital before identifying distressed properties for investors.
iFLIP then provides access to lenders to raise funds to purchase and renovate the property before overseeing the home's restoration.
Finally, iFLIP will sell the home on your behalf and take 30% of the total profits.
“You don't have to worry about hiring a contractor, because they have that. You don't have to worry about a real estate lawyer. They have all these relationships, so you don't have to worry about any of this stuff,” Hamid said, explaining why the program was so appealing to her as a first-time investor.
To receive loans from iFLIP's preferred lenders, Bay told the women they would need to have their names on the loan.
“That's not uncommon in the real estate industry if you don't have a track record with lenders doing remodeling and resales,” Barnett said.
They were approved for a hard money loan from Envision Funding. The loan was short-term and had a high interest rate.
The women said within weeks of applying for the joint venture program, iFLIP had identified homes in Woodlawn that they could each purchase.
At closing, each woman hired real estate attorney Alex Ranja to represent them, and Ranja was listed on iFLIP's website as part of the “iFLIP Chicago team.”
But Ms Barnett said Ranja never showed up to the closing ceremony.
Hamid said Ranja was present at her signing but failed to disclose a crucial part of the iFLIP loan agreement.
“Cross-default and cross-collateralization”
This is where things went terribly wrong, Messrs. Hamid and Barnett said. Buried among the hundreds of pages of documents they signed at closing were four sentences in a loan agreement that would have made them liable for Ramo Bey's debts.
This was part of a “cross-default and cross-collateral” clause, which meant that if Mr Bay defaulted on any of his loans, the lenders could claim against him for loans he owed to other iFLIP participants, such as Mr Hamid and Mr Barnett.
“Basically it says that if the person signing this loan has multiple accounts with this lender, they can use any of your payments to pay off those past due balances. And Ramo had multiple past due balances,” Hamid said.
Financial documents for both women showed that Bey's debts had been deducted from their loans.
Emails between iFLIP participant Ramo Bay and Envision Funding show that Bay was repeatedly told by lenders that past due balances would be deducted from other borrowers' accounts.
Barnett's loan statements showed thousands of dollars being repeatedly transferred from her loan account to other limited liability companies that Barnett had never heard of.
She later learned that the LLC was owned by another joint venture participant in iFLIP, who also had a loan agreement with Ramo Bey.
“Since closing, we have never received any funding to repair the project,” Burnett said.
Barnett gave NBC Chicago a tour of the Woodlawn property she purchased with iFLIP Chicago in 2022. The home was in complete disrepair and had been vacant for two years.
Barnett said about $200,000 is still needed to complete the renovations.
Barnett said every time she applied for funds from the loan to pay for the renovations, she was either rejected or given far less than she needed.
According to Barnett, Bay reassured her in an email that “everything would work out in the end” and that “you may get less back from your withdrawal than you paid in. You may also get more than you paid in.”
Barnett said she had no idea where the money was and told NBC Chicago she lost $169,000.
“We had the money to fix up the house and sell it, as we all had planned, but we couldn't actually spend the money because of bad loan terms,” Hamid said.
“Cross Interest”
Hamid's March loan statement shows seven charges for “reciprocal interest.”
“It turned out a significant portion of our money had been used to pay off other accounts,” Hamid said, “around $25,000 to $35,000.”
NBC 5 Responds traced the loan numbers on the “reciprocal interest” charges in Hamid's statement to several other iFLIP participants who had loan agreements with Bay.
One of these “reciprocal interest” claims comes from a Barnett loan.
“This was never to resell the property. This was to take out a loan to pay off a debt that didn't belong to us,” Barnett said.
“Real estate investment Ponzi scheme”
Now, in a recent lawsuit filed by both women, they allege that iFLIP lured them into a “real estate investment Ponzi scheme,” and they also accuse Envision Funding and Ranjha of participating in the fraud.
The lawsuit accuses iFLIP, Ranjha and Envision Funding of consumer fraud, fraudulent conspiracy, breach of contract and breach of fiduciary duty.
NBC 5 Responds has been contacted by several other iFLIP investors who made similar claims.
“We're all facing bankruptcies, foreclosures and short sales. My mom's 401k is hanging on this investment and she's at risk of losing over $200,000,” Hamid said.
According to Hamid's complaint, “Ramo Bey, Mikhael Bey, and iFlip breached the joint venture agreement by maliciously luring and fraudulently inducing Plaintiffs into the agreement in order to secure Plaintiffs access to the hard money loan proceeds, use those loan proceeds to repay loans of other investors recruited in the joint venture program in a classic Ponzi scheme, and to fund various other real estate and construction projects in which iFlip was involved.”
After his mortgage came due in February, Hamid tried to refinance his loan with a new lender, but he said he was told he owed too much and his home wasn't worth as much as it used to.
Hamid then asked Envision Funding for a repayment notice and discovered he owed another $60,000.
“Our December repayment notice said we owed the mortgage company about $315,000, which is what we based our payment on. But when we asked for our next repayment notice so we could refinance outside the mortgage company, we were told we owed $375,000 because the lender had added $60,000 in debt from a property that had nothing to do with us,” Hamid said.
Both women said Beyoncé went silent once they began asking questions.
Hamid said he reached out to his cousin, Mikael, last summer, but his advice was disappointing.
“When I asked my cousin about it, she was adamant that it was not her business and told me she could file for bankruptcy at any time,” Hamid said.
Barnett's loan is due in 2023. Because the renovations aren't finished, Barnett said she paid the lender $30,000 in fees to extend her loan by three months.
Despite the property facing foreclosure, Barnett is fighting to protect his investment property and hopes his lawsuit against iFLIP will help.
Communities blighted by foreclosed and abandoned homes
In a social media post from iFLIP Chicago, Bay spoke about his desire to bring development to Chicago's Black neighborhoods.
“We founded iFLIP Chicago about four years ago with the Black community in mind. Our desire was to uplift the Black community, rebuild and redevelop the neighborhood,” Bay said in another promotional video for iFLIP Chicago posted to its Facebook page.
Now, two more vacant and dilapidated homes are dotted around the Woodlawn community that Bay said he wanted to revitalize.
At least seven other iFLIP joint venture properties, including the Barnett property, are also currently in foreclosure, according to mortgage documents.
Sandra Robinson lives next door to the house Hamid was never able to finish renovating.
“It's an eyesore. It's a real eyesore. I hope something is done about it,” said Sandra Robinson, a longtime Woodlawn resident.
“I think we all need to get some justice out of this situation,” Hamid said.
“It's terrible that after two years there are no answers. There are more questions than answers,” Barnett said.
Ramo Bey's response
“Everyone knows my company is not a scam. I have helped many people become successful in the real estate industry over the years. Last year, myself and my clients were victims of predatory lending by a lender with cross-collateralization policies that were not disclosed or explained to them at the time of closing, which is what is causing most of these issues. However, I will defend myself and my company against the misleading allegations, and will pursue the lenders who caused all these harms,” Bay said in a statement to NBC 5 Responds.
Alex Ranja's attorney told NBC 5 Responds he plans to file a motion with the court to dismiss the case.
“The loans are sold at closing. We have no control over the loans after closing. All decisions, including fees, are made by the servicing lender. The decision to cross-collateralize the loans was made by the new lender, Roc Capital/Loan Funder, to collect on the delinquent loans. My firm had nothing to do with that decision and all complaints against my firm should be dismissed,” Envision Funding's statement said.
Rock Capital said the “cross-collateral” clause is a standard provision in all of its loan agreements. The company declined to comment further.
Repairing a house
Bay continues to host iFLIP investment seminars in a private Facebook group for new investors, and according to Hamid and Barnett, Bay recently relocated to Atlanta and is running a new business under the name Restore Homes.