“Pattern of misconduct”: Bialostozky faces another Chicago foreclosure as alleged mortgage fraud widens across multiple states

“Pattern of misconduct”: Bialostozky faces another Chicago foreclosure as alleged mortgage fraud widens across multiple states

Sam Lounsberry

Tue, September 22, 2026 at 10:30 PM GMT+3 4 min read

Financial wreckage trailing Lakewood, New Jersey-based real estate investor Chaim Bialostozky metastasized from a Chicago crisis into a multistate mortgage fraud meltdown.

Bialostozky is facing allegations in at least three states of fraudulently inducing loan originators into providing federally backed debts that were far larger than they should have been, because the landlord misled them about the size of his transactions, public records show. In total, nearly $44 million in mortgage debt tied to real estate he owns or recently owned in Illinois, Connecticut and Oklahoma is working through foreclosure court proceedings, with most of that amount secured by Chicago multifamily property.

Bialostozky is himself on the hook for at least $25.5 million, while another South Side Chicago apartments portfolio that he sold to an LLC managed by Israel Bialostozky — who public records databases show has shared an address with Chaim Bialostozky — accounts for the additional $18 million in the sights of their lenders.

The fraud allegations anchoring the Connecticut, Chicago and Tulsa cases mirror each other. In all jurisdictions, lenders accuse Chaim Bialostozky of orchestrating a brazen scheme using back-to-back property sales with an intermediary.

By submitting paperwork reflecting artificially inflated secondary purchase prices while concealing lower-priced initial transactions days or even just hours earlier, Bialostozky allegedly tricked lenders into issuing mortgages that covered his true acquisition costs, allowing him to purchase properties with zero down payment and walk away with cash.

The latest creditor to go after the purportedly rogue borrower is Fannie Mae, which last week filed a $6.2 million foreclosure lawsuit in Cook County Circuit Court against Yellow Portfolio Holdings LLC, an entity managed by C. Yoseph Bialostozky. The complaint targets 90 residential units across three South Side properties at 8200 South Maryland, 7845 South Avalon and 7901 South Drexel avenues. The landlord ceased monthly debt service payments in April and allowed the buildings to rack up severe building code violations and unpaid municipal utility judgments, according to the suit.

Fannie didn't lob fraud allegations over this portfolio in its court filing against Yellow Portfolio last week. However, the chains of title for the relevant properties show similarities to those that have drawn such accusations against Bialostozky. Like the Far West Side portfolios where lender Walker & Dunlop, acting on behalf of Freddie Mac, made fraud allegations against Bialostoszky, he also bought the Maryland, Avalon and Drexel avenue buildings from Avraham Levin mere weeks after Levin had taken control of the properties in June 2021.

The Chicago lawsuit is the latest domino to fall in a nationwide crackdown on Bialostozky's investments. Newly uncovered legal filings reveal Freddie Mac is systematically foreclosing on Bialostozky's properties across the country.

On July 1, Walker & Dunlop filed twin foreclosure and fraud lawsuits in Waterbury, Connecticut, again on behalf of Freddie. The suits target Courtyard Apt Holdings LLC and Tower View Apt LLC, seeking to recover outstanding debt encumbering two apartment complexes.

Subsequent emergency receivership motions filed by Walker in late August show Bialostozky also stopped making monthly debt service payments on his Connecticut properties in April.

Since the federally backed lenders launched their legal blitz, Bialostozky has gone dark. He and his corporate entities have failed to appear in court or file an answer to the Connecticut complaints since they were served in early July. He didn't return The Real Deal's requests for comment.

Representatives of Fannie, Freddie and Walker & Dunlop also didn't return requests for comment.

Bialostozky is also leaving behind a trail of unpaid local vendors. Footnotes in the Connecticut court filings reveal that plumbing companies, drywall contractors, real estate brokers and even Bialostozky's own lawyers have sued his entities over unpaid bills at the properties. These local vendor lawsuits expose a management alias tied to Bialostozky: Red Oak Management Inc. and Red Oak Management VA LLC. When sued by these contractors, both Bialostozky and Red Oak Management failed to appear in court, resulting in active default judgments getting entered against them.

To fast-track its takeover of the decaying Connecticut buildings, Walker & Dunlop is leaning on the allegations occurring in other states. The lender attached receivership orders from Chicago and Oklahoma directly to its Connecticut motions to argue that Bialostozky is executing a "common plan and unlawful fraudulent scheme" and a "pattern of misconduct" that justifies the immediate appointment of an emergency receiver without a hearing. The requested receiver in Connecticut is Trigild IVL's Chris Neilson — the firm currently managing the squatter-filled, $18 million Gray Portfolio LLC-owned properties tied to Israel Bialostozky in Chicago.

So far, court records show Bialostozky hasn't appeared or responded in any of the foreclosure proceedings, according to legal records available Tuesday.

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