DETROIT (CN) – In a federal class action, 114 Iraqi-Americans say they were duped in a $1 billion Ponzi scheme run by two men posing as “altruistic, religious and civil-minded do-gooders.” The class claims “the geographic scope of the Ponzi scheme spans the globe, perhaps leading even to the highest levels of the emerging Iraqi state.”
One hundred and fourteen John Doe plaintiffs claim Abdzahra Shalushi and Ahmed Alabadi were the masterminds of two interrelated Ponzi schemes that “preyed upon the Iraqi-American community in Southeast Michigan, and throughout the United States and other countries, by recruiting individuals to act as agents for their affinity fraud.”
They claim the defendants exploited their “contacts with Arabic mosques, churches, community organizations, family and friends.”
Named as defendants are 20 people and three corporations.
Shalushi and Alabadi ran distinct but interconnected Ponzi schemes, promising quick repayments and guaranteed large returns from projects in Iraq and other Middle-Eastern countries, according to the complaint.
But the class says it was a classic Ponzi scheme, using new money to pay off earlier investors and creditors.
Shalushi ran his scheme from 2006 to 2008, and Alabadi from 1998 to 2008, according to the 36-page complaint.
Also named in the action were Shalushi and Alabadi’s alleged shell companies, Fatima International, Adam Trade Group and Fedek Group, and as 16 purported “agents.”
The plaintiffs say the defendants “exploited cultural taboos forbidding dishonesty and financial self-dealing when dealing with tribal brothers and sisters, as well as the Arab custom of doing business with cash and a handshake, to dupe thousands of Iraqi-Americans into investing in Iraqi and Middle-Eastern projects. …
“The investments of individual Iraqi-American families in these Ponzi schemes range from a couple of thousand dollars to several million dollars,” the complaint states. “Investors run the gamut from high school students to housewives to blue-collar tradesman to multimillionaire businessmen.”
The defendants promised annual interest payments of 80 percent to 100 percent and promised to repay principle in 8 to 12 months, the plaintiffs say.
But after investing, the plaintiffs say, “many families have lost their homes, businesses, cars, and personal possessions, their opportunity for an education, their peace of mind, their hopes for a secure and happy life in America, and even their marriages. …
“It has shattered the social and economic fabric of the Iraqi-American community, especially in Dearborn, Mich. – the center of the Arab Diaspora in the United States,” the complaint states.
The plaintiffs say they filed as John Does for their own protection. They are represented by David Hansma with Mantese Honigman Rossman and Williams of Troy, Mich.