‘We got justice’: A Minnesota jury just ruled that 'Shariah compliant' home deals were a scheme to defraud Muslim homebuyers

A jury found Banken civilly liable for violating the Minnesota Human Rights Act after he specifically targeted Minnesota’s Somali Muslim community with “Shariah compliant” contracts.

The ruling comes at a time when Somali Minnesotans are facing increasingly racist rhetoric — for example, when a right-wing influencer claimed the community was involved in widespread daycare fraud.

Executive director of the Islamic Association of North America, Imam Yusuf Abdulle, said at a community gathering in Minneapolis that the recent racist attacks “are fueled by years of reckless rhetoric, political scapegoating, and media narratives that repeatedly associate Somalis with crime, danger and social problems.”

Here’s what to know about Banken’s scheme.

Banken’s ‘contract-for-deed’ scam

Many Muslims follow Islamic principles that prohibit them from paying or receiving interest.

“Islam’s aim from any financial transaction is to maintain economic justice between those who have and those who have not,” Wafiq Fannoun, president of Reba Free, LLC told the Federal Reserve Bank of Minneapolis. “It is essential in Islam that all parties involved (…) share the actual profit or loss of a venture, and that no one gets predetermined compensation such as interest.”

Minnesota has a sizable Somali Muslim population which Banken targeted with his “Shariah compliant” contract-for-deed deals, which he said wouldn’t come with interest.

Instead, he would give his Muslim buyers contracts that not only came with high interest rates, but also came with worse sales prices, down payments and monthly payments than what he offered other buyers.

Contracts for deed are not inherently illegal, but they can frequently be predatory. In a contract for deed, the seller keeps the house’s legal title until the buyer has finished making all of the payments. The seller keeps the title while the buyer pays for things like property taxes, insurance and repairs.

Contracts for deed don’t provide buyers with the same legal protections that they would get with a traditional mortgage. Banken took advantage of that by forcing sellers to sign up for very short-term loans with large down payments, then making them pay large “balloon payments” at the very end that they were unlikely to be able to afford.

Once the seller could no longer pay, they were forced out of the house without any of the money they put into it, often leaving them without a home or money for lodging. From there, Banken could offer the same property up to a new buyer — who he would similarly force out with a contract for deed.

A press release from Minnesota Attorney General Keith Ellison’s office calls that process a “slow flip.”

“Buying a home is often the biggest and most significant purchase any of us makes, and Chadwick Banken set homebuyers up to fail so he could profit,” said Ellison. “I am extremely pleased that we were able to hold Banken accountable at trial for the predatory and unlawful scheme he ran.”

The Minnesota attorney general’s office was the group who originally filed the lawsuit against Banken.

Chadwick Banken did not immediately respond to Moneywise for comment.