Securities and Exchange Commission v. Equity Build, Inc .

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 24-2254
S ECURITIES AND EXCHANGE C OMMISSION ,
Plaintiff-Appellee,
and
K EVIN B. DUFF , Receiver, et al.,
Appellees,
v.
EQUITY B UILD, I NC ., et al.,
Defendants,
A PPEAL OF : S HATAR C APITAL P ARTNERS .
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:18-cv-05587 — Manish S. Shah, Judge.
____________________
A RGUED S EPTEMBER 4, 2025 — DECIDED D ECEMBER 4, 2025
____________________
Before BRENNAN , Chief Judge, and K OLAR and
M ALDONADO, Circuit Judges.

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2 No. 24-2254
K OLAR , Circuit Judge. This appeal concerns the district
court’s distribution of proceeds from the sale of two proper-
ties in the aftermath of a real estate Ponzi scheme. Victims of
the scheme—a group of individual investors and appellant
Shatar Capital Partners—both claim priority to those pro-
ceeds. We previously decided a similar appeal concerning
proceeds from a different set of properties involved in the
same Ponzi scheme in SEC v. EquityBuild, Inc., 101 F.4th 526
(7th Cir. 2024) (“EquityBuild I”).
Here, as in EquityBuild I, the district court adopted its ap-
pointed receiver’s recommended distribution plan, awarding
priority in both properties to the individual investors and lim-
iting the claimants’ recoveries to their contributed principal,
less any distributions previously received from EquityBuild.
On appeal, Shatar challenges that decision, arguing that it
should have priority because it recorded its mortgages on the
properties before the individual investors recorded theirs. But
because the district court did not err in determining that when
Shatar invested, it was on inquiry notice of the individual in-
vestors’ preexisting interests in the properties, we affirm.
I. Background
We recite the relevant factual and procedural background,
including the EquityBuild Ponzi scheme, SEC action, receiv-
ership, EquityBuild I, and the individual investors’ and Sha-
tar’s investments in the subject properties.1
1 All facts relevant to this appeal are set forth in this opinion, but more
detailed descriptions of the Ponzi scheme are recounted in EquityBuild I,
101 F.4th at 528–29 and SEC v. EquityBuild, Inc., 2023 WL 2018906, at *1–3
(N.D. Ill. Feb. 15, 2023).

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No. 24-2254 3
A. The EquityBuild Ponzi Scheme
From approximately 2010 to 2018, Jerome and Shaun Co-
hen ran a Ponzi scheme through their real estate investment
companies, EquityBuild, Inc. and EquityBuild Finance, LLC
(“EBF”). The scheme began with the Cohens selling promis-
sory notes to institutional lenders and individual investors.
Each note supposedly represented a fractional interest in a
specific real estate property, mostly residences on Chicago’s
South Side. The notes entitled investors to 12 to 20% returns
on their principal contributions.
EquityBuild’s stated business model was straightforward.
They pitched high-return promissory notes to investors, rep-
resenting that the notes were fully secured by real property.
In exchange for their contributions, EquityBuild’s investors
could obtain fractional ownership shares in rental properties
that EquityBuild would manage—an attractive passive in-
vestment with little apparent downside, given that the notes
were purportedly secured by the properties.
Using investors’ collective funds, the Cohens would pur-
chase an income-generating property, creating a mortgagee-
mortgagor relationship between EquityBuild, on one hand,
and the group of investors for a particular property on the
other. EquityBuild would then enter a separate mortgagee-
mortgagor arrangement with a third party at a higher interest
rate and with a shorter term than traditional mortgages. Eq-
uityBuild would retain the difference between the mortgage
payments received from the third parties and the interest pay-
ments made to the noteholder investors.
The Cohens assured their investors that the third parties
were qualified borrowers with strong credit, making default

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4 No. 24-2254
unlikely. That was false. In reality, EquityBuild secured few
third-party buyers, and itself owned most of the properties
securing the notes, with some third parties renting. Equi-
tyBuild also inflated the properties’ values, collecting on av-
erage 47% more from investors than was needed to purchase
the properties. That difference allowed the Cohens to retain
15 to 30% of the funds invested.
In 2017, as they struggled to make payments on the prom-
issory notes, the Cohens shifted away from selling notes and
began offering investors stakes in real estate funds, which
would pool capital to buy and renovate properties. Again the
Cohens promised large returns. But EquityBuild used much
of the new fund investors’ contributions to pay off earlier
noteholders. And many of the properties the real estate funds
invested in were the same properties supposedly securing the
earlier noteholders’ investments.
By late 2017, investors in more than 1,200 notes still had
not been repaid their principal, and EquityBuild owed almost
$75 million in delinquent payments. By May 2018, Equi-
tyBuild and EBF had less than $100,000 in their accounts.
EquityBuild’s activities bore the hallmarks of a Ponzi
scheme, in which fraudsters secure funds from new investors
to repay earlier investors, creating the illusion of high returns.
For example, in the 25-month period from January 2015 to
February 2017, the Cohens collected only $3.8 million in rev-
enue from the properties while making $14.5 million in inter-
est payments to investors. In August 2018, Shaun Cohen ad-
mitted in a video emailed to EquityBuild’s noteholders that
the company had used later investments to fund interest pay-
ments to earlier investors, and the business structure was no
longer sustainable.

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No. 24-2254 5
B. SEC Action and Equitable Receivership
In August 2018, the Securities and Exchange Commission
brought an enforcement action alleging that the Cohens,
through EquityBuild and EBF, violated various provisions of
the Securities Exchange Act of 1934 and the Securities Act of
1933. Days later, the SEC obtained a temporary restraining or-
der against the Cohens that froze their assets and halted Eq-
uityBuild’s operations.
The district court appointed a receiver and directed him to
develop a plan to recover and liquidate EquityBuild’s assets
for the benefit of the victims. Soon after, EquityBuild entered
a consent judgment with the SEC, acknowledging the scheme.
The receiver identified the properties owned by EquityBuild
and presented the district court with his proposed liquidation
plan. The receiver organized those properties into ten groups
to facilitate an orderly distribution of funds to victims.
C. EquityBuild I
EquityBuild I arose from the claims-resolution process for
the first of those ten groups: the Group 1 properties.
EquityBuild I involved a private lender, BC57, LLC, that
loaned about $5.3 million to EquityBuild in 2017 (after Equi-
tyBuild had shifted its model from issuing notes to soliciting
investments in real estate funds). The loan was secured by
five properties on the South Side of Chicago. BC57 believed it
had made its loan in exchange for priority mortgages on the
five Group 1 properties. But at the time of BC57’s loan, those
properties were already owned by EquityBuild and were sub-
ject to preexisting liens held by various individual investors.
BC57 was defrauded: at the closing of BC57’s investment,
EquityBuild supplied it with false payoff letters and releases

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6 No. 24-2254
purporting to show that the investment proceeds would pay
off the existing loans secured by the individual investors’
liens on the five properties. But the individual investors with
preexisting liens neither signed the releases nor received the
funds contributed by BC57.
The district court determined that the releases were fa-
cially invalid and found that BC57’s payment in full alone did
not extinguish the individual investors’ mortgages, awarding
priority to the individual investors.
BC57 appealed, and we affirmed. We observed that under
Illinois law, without a valid release, payment alone does not
extinguish a preexisting interest in real property. And we
held that the district court did not err in determining that Eq-
uityBuild’s releases were invalid. The individual investors
thus maintained their priority interests in the Group 1 prop-
erties.
EquityBuild I, like the case before us, involved an entity in-
vesting funds with the belief that it was receiving a priority
interest. But as here, principles of Illinois law affecting mort-
gage priority undermined that expectation.
D. 7749 South Yates and 5450 South Indiana
Against that backdrop, we now discuss the facts directly
relevant to this appeal, arising from the claims-resolution pro-
cess for another five properties (the “Group 2 properties”).
Two of those properties are at issue here: 7749 South Yates
(“Yates”) and 5450 South Indiana (“Indiana”). We must de-
cide who has the priority mortgage in each property—Shatar
or the individual investors.
EquityBuild began soliciting investments from individu-
als for the purchases of the Indiana and Yates properties in

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No. 24-2254 7
December 2016 and February 2017, respectively. On March
14, 2017, EquityBuild bought the Yates property for
$1,550,000, and Jerome Cohen and the individual investors
executed a mortgage on Yates for $2,860,000. Later, on March
30, EquityBuild bought the Indiana property for $1,675,000
and the next day, Cohen and the individual investors exe-
cuted a mortgage on Indiana for $3,050,000. The mortgages on
the properties listed the individual investors’ identities in an
exhibit. The individual investors recorded their mortgages in
both properties on June 23, 2017.
During the same period, EquityBuild was soliciting in-
vestments in the same properties from Shatar. In December
2016, while discussing opportunities for Shatar to invest in
EquityBuild, Shatar’s principal, Ezri Namvar, emailed Shaun
Cohen and Tyler DeRoo (an EquityBuild representative). The
email shows that Shatar understood EquityBuild’s business
model and the potential pitfalls that model posed to deter-
mining investors’ priority: “Since we have become aware of
your business structure, assuming your previous deals have
been closed with cro[w]dfunding investors, we need to make
sure your re[f]inancing of already closed deals are allowed
and kosher[.]” Cohen and DeRoo responded by furnishing
copies of EquityBuild’s rollover forms (used when investors
would contribute proceeds from an existing investment into
new transactions) and blank copies of EquityBuild’s standard
lender documents, including its template wire instructions,
mortgage, servicing agreement, and note. Namvar later testi-
fied that he never reviewed those documents.
In March 2017, one week before buying the Yates property
and executing the Yates mortgage to the individual investors,
EquityBuild emailed Namvar about the Indiana and Yates

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8 No. 24-2254
properties with information on the purchase prices and clos-
ing dates for each property. Ultimately, Shatar and Equi-
tyBuild agreed to terms for one loan of $1,800,000 to be se-
cured by both the Indiana and Yates properties. On March 15,
while preparing the loan documents, EquityBuild’s real estate
attorney’s office conveyed to Shatar that the purchase trans-
action for the Yates property had already closed. Namvar
then emailed DeRoo asking him to call “ASAP,” but there is
no evidence in the record regarding that phone call.
On March 30, 2017, while preparing the closing docu-
ments for the Indiana property, an employee for the title in-
surance company emailed Shatar, EquityBuild, and Equi-
tyBuild’s real estate attorney that EquityBuild would receive
$86,000 from the closing. Namvar responded to the email,
“What??? I thought the borrowers are putting over 1.5 mil in
to close the purchases[.] Can someone explain this 2 me?” The
closing documents for the Indiana property reflect that the
borrower (an EquityBuild entity) ultimately received nearly
$110,000 from the transaction.
Also on March 30, Jerome Cohen executed mortgages on
both the Yates and Indiana properties in favor of Shatar for a
maximum lien of $3,600,000. These mortgages secured a
March 28 promissory note from Shatar to EquityBuild for
$1,800,000. Shatar recorded its mortgages on both the Yates
and Indiana properties on April 4, 2017—more than two
months before the individual investors’ mortgages were rec-
orded.
In summary, EquityBuild purchased the Yates property
on March 14 for $1,550,000 and executed a mortgage on Yates
for $2,860,000 to the individual investors the same day. On
March 28, Shatar loaned EquityBuild $1,800,000. On March

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No. 24-2254 9
30, EquityBuild purchased the Indiana property for
$1,675,000 and executed mortgages on Indiana and Yates to
Shatar for a total maximum lien of $3,600,000. The next day,
EquityBuild executed a mortgage on the Indiana property for
$3,050,000 to the individual investors. Shatar recorded on
April 4; the individual investors recorded on June 23.
As in EquityBuild I, after the SEC uncovered the Cohens’
scheme and the district court set up the equitable receiver-
ship, the receiver sold the five Group 2 properties and now
holds the proceeds of the sales in separate bank accounts
pending resolution of the claims at issue here. The funds are
insufficient to fully repay the victims who invested in the
Group 2 properties.
E. Procedural Background
In the proceedings below, the district court determined
that the individual investors have first-position priority inter-
ests in the Indiana and Yates properties over Shatar. Shatar
claimed priority because it indisputably recorded its mort-
gages in both properties before the individual investors. But
the district court found that Shatar was on inquiry notice of
the individual investors’ mortgage in the Yates property and
of their equitable mortgage in the Indiana property. Thus,
Shatar’s first-in-time recording would not give it priority.
The district court also determined that the individual in-
vestors were not entitled to recover interest—only their pro
rata share of the proceeds in the sales of the Yates and Indiana
properties, calculated based on the amount of each individual
investor’s original principal, minus any amounts already re-
ceived from EquityBuild.

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10 No. 24-2254
Shatar appealed. As in EquityBuild I, the district court
stayed the distribution of any proceeds pending the outcome
of this appeal.
II. Discussion
We first determine that we have appellate jurisdiction and
that Shatar may pursue this appeal. Finding our jurisdiction
secure, we review the district court’s priority determination
for each property. We reject Shatar’s arguments for reversing
the district court, primarily because Shatar was on inquiry no-
tice—that is, it knew facts that would make a prudent person
conduct further investigation before investing—well before
Shatar recorded its mortgages. Finally, we conclude that Sha-
tar’s challenge to the mode of distribution is moot.
A. Appellate Jurisdiction
No party challenges our jurisdiction, but before proceed-
ing to the merits, we have an independent duty to ensure that
we may exercise appellate jurisdiction. Dexia Credit Loc. v.
Rogan, 602 F.3d 879, 883 (7th Cir. 2010).
Shatar challenges on appeal the order approving the dis-
tribution of proceeds from the Group 2 properties—one com-
ponent of the broader, ongoing receivership proceedings. We
have appellate jurisdiction to review a district court’s “final
decision.” 28 U.S.C. § 1291. But a “district court’s order affirm-
ing the receiver’s distribution plan is not a final order.” SEC
v. Wealth Mgmt. LLC, 628 F.3d 323, 330 (7th Cir. 2010). Thus,
on its face, § 1291 forecloses interlocutory review of the dis-
trict court’s distribution order.
However, the collateral order doctrine establishes appel-
late jurisdiction under § 1291 for interlocutory review of “that
small class [of decisions] which finally determine claims of

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No. 24-2254 11
right separable from, and collateral to, rights asserted in the
action, too important to be denied review and too independ-
ent of the cause itself to require that appellate consideration
be deferred until the whole case is adjudicated.” Id. (quoting
Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)).
To be within the collateral order doctrine’s scope, an appeal
must: (1) “conclusively determine the disputed question,” (2)
“resolve an important issue completely separate from the
merits of the underlying action,” and (3) “be effectively unre-
viewable on appeal from a final judgment.” Id.
We have previously exercised jurisdiction under the col-
lateral order doctrine to review an interlocutory appeal of a
district court’s distribution plan in equitable receivership pro-
ceedings. Id.; EquityBuild I, 101 F.4th at 530 n.2. We do so here,
too.2
With our jurisdiction secure, we examine another thresh-
old issue: whether Shatar may pursue this appeal.
B. Shatar is a Proper Claimant
Shatar made the loans to EquityBuild for the Yates and In-
diana properties with funds contributed by four lenders, for
whom Shatar acts as agent and servicer. Shatar’s lenders are
not parties to this appeal. The individual investors urge that
Shatar’s lenders—not Shatar—are the proper claimants
2 The EquityBuild I concurrence “question[ed] the existence of appel-
late jurisdiction” to review the distribution of proceeds from the Group 1
properties under the collateral order doctrine. EquityBuild I, 101 F.4th at
533 (Easterbrook, J., concurring). But the concurrence expressly noted that
the majority’s conclusion that “the collateral-order doctrine supports an
immediate appeal … reflects a holding of” Wealth Management. Id. The
same is true here.

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12 No. 24-2254
against the receivership estate, so we should reject Shatar’s
appeal. But we are satisfied that Shatar itself may pursue
these claims.
Executed letter agreements show that the four lenders au-
thorized Shatar to act as a servicer on their behalf for their in-
vestments in the Indiana and Yates properties. Under the
agreements, Shatar was entitled to “retain a split on payments
made” on the EquityBuild notes. The agreements also pro-
vided that Shatar “will retain and maintain all original docu-
ments, monthly payments received and distribution of
funds,” “will manage [its lenders’] interest in the subject
property and any further actions as they deem necessary,”
and “has authorization to act as an authorized agent specific
to this transaction as deemed necessary.”
Those contractual rights empower Shatar to pursue claims
against the receivership estate. In CWCapital Asset Manage-
ment, LLC v. Chicago Properties, LLC, we recognized a mort-
gage servicer’s standing to bring suit on behalf of its lenders
against the former tenant of a commercial landlord (the bor-
rower) to recover funds that the former tenant had paid to the
landlord to settle a dispute over unpaid rent. 610 F.3d 497, 501
(7th Cir. 2010). Much like Shatar’s lenders, the CWCapital
lenders had granted the servicer “full power and authority,
acting alone, to do or cause to be done any and all things in
connection with such servicing and administration which it
may deem necessary or desirable.” Id. We observed that the
servicing agreement “delegates what is effectively equitable
ownership of the claim (albeit for eventual distribution of pro-
ceeds to the owners of the tranches of the mortgage-backed
security in accordance with their priorities) to the servicer.”
Id.

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No. 24-2254 13
Here, as in CWCapital, Shatar’s agreements with its lend-
ers empower it to pursue the lenders’ claims. Moreover, be-
cause it was entitled to “retain a split on payments made,”
Shatar has its own pocketbook injury allowing it to pursue
claims against the receivership estate. “In cases involving the
disposition of assets, as here, parties whose assets are affected
by the actions of another party or a court ruling generally
have standing to appeal.” Big Shoulders Cap. LLC v. San Luis &
Rio Grande R.R., Inc., 13 F.4th 560, 568 (7th Cir. 2021).
Assured that Shatar is a proper claimant, we turn to the
merits.
C. The Individual Investors Have Priority Interests in
the Proceeds of the Indiana and Yates Properties
In administering a receivership estate, the district court’s
equitable powers are broad, “appellate scrutiny is narrow,”
and the standard of review is abuse of discretion. Wealth Man-
agement, 628 F.3d at 332–33. “District judges possess discre-
tion to classify claims sensibly in receivership proceedings,”
SEC v. Enter. Tr. Co., 559 F.3d 649, 652 (7th Cir. 2009), in which
“the primary job of the district court is to ensure that the pro-
posed plan of distribution is fair and reasonable,” Wealth
Management, 628 F.3d at 332. That said, “[a] clear error of fact
or law counts as an abuse of discretion.” Finch v. Treto, 82
F.4th 572, 578 (7th Cir. 2023). And we “apply de novo review
to legal questions in receivership proceedings.” EquityBuild I,
101 F.4th at 530.
In this equitable receivership, the receiver takes the two
properties at issue, both in Chicago, “subject to all liens, pri-
orities, or privileges existing or accruing under the laws of the
state” of Illinois. Marshall v. New York, 254 U.S. 380, 385 (1920).

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14 No. 24-2254
Under Illinois law, mortgages must be recorded to be en-
forced “as to all creditors and subsequent purchasers, without
notice.” 765 ILCS 5/30. The first to record a mortgage gener-
ally has priority over another who records later. Reed v. Eastin,
379 Ill. 586, 592 (1942).
The individual investors executed their mortgage on the
Yates property first, then came Shatar’s mortgages on Yates
and Indiana, and lastly the individual investors’ mortgage on
the Indiana property. Shatar recorded its mortgages first, on
April 4, 2017; the individual investors recorded theirs on June
23, 2017. So, based on 765 ILCS 5/30’s plain application and
the timing of the recordings alone, it would appear that Shatar
had priority interests in both properties.
But that only holds if Shatar recorded without notice of the
individual investors’ mortgages. Under Illinois law, a subse-
quent purchaser with notice of an earlier interest “is bound by
the former deed even though his own deed be recorded first.”
Id. In other words, “[a] person or entity cannot be a bona fide
purchaser of property if he or she has actual or constructive
notice of the outstanding rights of other parties to the prop-
erty.” Almazan v. 7354 Corp., 2023 IL App (1st) 220794, ¶ 25.
A purchaser like Shatar may have actual notice—
“knowledge that the purchaser actually had at the time of the
conveyance”—or constructive notice—“knowledge that the
law imputes to the purchaser.” Id. One form of constructive
notice is inquiry notice, imputed by law when the information
available to the purchaser would cause a prudent person “to
think twice about completing the transaction.” In re County
Collector, 397 Ill. App. 3d 535, 549 (1st Dist. 2009). Illinois law
charges a purchaser on inquiry notice with “knowledge of

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No. 24-2254 15
facts that he or she would have discovered by diligent in-
quiry.” Almazan, 2023 IL App (1st) 220794, ¶ 26.
Here, the district court determined that Shatar was on in-
quiry notice of the individual investors’ preexisting mortgage
on the Yates property and equitable mortgage on the Indiana
property, making Shatar responsible for facts it would have
uncovered through diligent inquiry. We agree. We discuss
Shatar’s inquiry notice as to each property in turn.
1. Shatar’s Inquiry Notice Regarding the Yates Property
“[O]ne having notice of facts which would put a prudent
man on inquiry is chargeable with knowledge of other facts
which he might have discovered by diligent inquiry.” Reed,
379 Ill. at 592. The district court identified at least four red
flags that, taken together, were sufficient to make Shatar think
twice about the Yates transaction, and obligated it to conduct
further diligence before proceeding. We first discuss the red
flags that placed Shatar on inquiry notice. Then, we examine
what Shatar is charged with knowing: the facts it “might have
discovered by diligent inquiry.” Id.
First, Shatar’s knowledge of EquityBuild’s business model
should have prompted it to take additional steps to ensure it
had priority. Shatar was introduced to EquityBuild in a No-
vember 2016 email. In that email, EBF representative Christo-
pher Mora attached a note-offering memorandum (unrelated
to the properties at issue in this appeal) and described Equi-
tyBuild’s general business model: pooling money from indi-
vidual investors to invest in specific properties, with the in-
vestors receiving a “first lien position on the property,” con-
sistent with its practice for “all other EBF notes.” Equipped
with knowledge of the business model, Shatar was on notice

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16 No. 24-2254
that it would need to ensure, for any investment in Equi-
tyBuild, that it in fact held a first-position interest.
Second and relatedly, before investing, Shatar knew that
EquityBuild’s business model relied on “crowdfunding in-
vestors.” Indeed, Namvar raised in an email the very issue
central to this appeal: “we need to make sure your refinancing
of already closed deals are allowed and kosher[.]” Namvar
(Shatar’s corporate representative) thus knew that Equi-
tyBuild’s tactics—pooling investments from many sources to
invest in individual properties, refinancing prior transactions,
and permitting investors to participate in rollovers—posed
hazards to new investors, like Shatar, investing in properties
that were potentially already encumbered.
Third, when EquityBuild responded to Namvar with the
information about rollovers and provided its template trans-
action documents (including its form promissory note, mort-
gage, and servicing agreements), Namvar declined to review
those materials. But these documents would have informed
Shatar of EquityBuild’s typical practices, which should have
prompted Shatar to inquire about whether completed ver-
sions of these documents existed in relation to the Yates prop-
erty.
Fourth, and perhaps most alarming, Shatar knew that Eq-
uityBuild had already purchased the Yates property before
Shatar loaned the funds for Yates. Before it issued its loan,
Shatar received an email reporting that the Yates purchase
had closed, and it discussed that fact internally on March 20,
2017. This was strong evidence that the Yates purchase had
been funded by other means. That EquityBuild had pur-
chased the Yates property suggests that another lender (or as
Shatar had reason to know, many lenders pooling capital)

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No. 24-2254 17
may have already loaned funds secured by the property. Nev-
ertheless, Shatar proceeded in making its loan covering both
the Yates and Indiana properties on March 28, assuming it
had priority without inquiring further.
Instead of thinking twice and conducting additional in-
quiry, Shatar ignored these four red flags. As with the ostrich
doctrine in the criminal context, “deliberate avoidance of
knowledge is a form of knowledge at least functionally equiv-
alent to actual knowledge.” United States v. Mikaitis, 33 F.4th
393, 398 (7th Cir. 2022). But with inquiry notice, Illinois law
only charges Shatar with the information it could have dis-
covered by diligent inquiry. Almazan, 2023 IL App (1st)
220794, ¶ 26. That raises the dispositive question: faced with
these red flags, could Shatar have discovered that there were
preexisting interests in the Yates property that would
threaten its priority? The district court answered in the affirm-
ative, and that was not error.
Given its knowledge that EquityBuild closed on the Yates
purchase before receiving Shatar’s loan, Shatar might reason-
ably have believed that EquityBuild planned to use Shatar’s
loan to refinance debt in relation to the Yates property. But if
Shatar believed that its loan was refinancing the Yates prop-
erty, Shatar sought no assurances that any prior loan had been
paid off. It was unreasonable not to seek such assurances, or
to attempt to secure comfort that Shatar maintained a priority
interest. Indeed, months earlier, Namvar had asked about Eq-
uityBuild’s process for refinancing loans and had received the
template forms that he never looked at. But if he suspected
that EquityBuild was refinancing the Yates property, it would
have been prudent to ask for the transaction-specific rollover
documents in this instance (which did not exist, a fact that

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18 No. 24-2254
would have alerted him that EquityBuild was sourcing funds
from other investors to buy the property).
Despite knowing that the Yates property had not been
purchased with its own loan, Shatar simply never inquired
about how EquityBuild purchased the property. Faced with
these unusual circumstances, Shatar needed to do more than
stick its head in the sand.
Shatar contends that any follow-up inquiry would have
been futile, because Shatar could not have learned accurate
information from the professional fraudsters at EquityBuild,
who frequently lied to their investors and would never have
admitted to Shatar that the Yates and Indiana properties were
already encumbered. But Shatar did not present this futility
argument below. It argued generally that it was not on in-
quiry notice of the individual investors’ interests in the Group
2 properties; it never argued specifically that it would not
have received accurate information from EquityBuild had it
inquired further about the status of its interest.
We have repeatedly recognized “that arguments made but
not developed do not preserve issues for appellate review.”
In re Aimster Copyright Litig., 334 F.3d 643, 656 (7th Cir. 2003).
Thus, Shatar waived its futility argument. Rozumalski v. W.F.
Baird & Assocs., Ltd., 937 F.3d 919, 925 (7th Cir. 2019) (“We ap-
ply waiver even if the issue may have been before the district
court in more general terms, still holding a party to its respon-
sibility to make a specific argument.” (internal quotation
omitted)); Domka v. Portage County, 523 F.3d 776, 783 (7th Cir.
2008) (applying waiver even where the argument on appeal
is consistent with the argument presented below).

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No. 24-2254 19
Setting waiver aside, Shatar’s futility argument is unavail-
ing. Had Shatar been more diligent, we cannot say with cer-
tainty that EquityBuild would have lied to Shatar about its
priority regarding the Yates property: up to this point, Shatar
had received truthful answers in response to its questions. Eq-
uityBuild might have lied, equivocated (itself a red flag), or
told the truth—that a group of crowdfunded investors held a
preexisting mortgage secured by Yates. Even were we to con-
sider this waived futility argument, the record supports that
Shatar’s failure to follow up on this issue fell short of reason-
able diligence.
In any event, Shatar knew of at least one other investor in
the Yates property who it could have consulted about its in-
terest. Shatar worked with a third party, Doron Kermanian,
in connecting with EquityBuild. Indeed, it appears Kerma-
nian referred EquityBuild to Namvar. Kermanian wired
funds to EquityBuild for his own fractional share of the Yates
property on March 17—unrelated to Shatar’s investment.
Shatar even paid Kermanian a referral fee of $4,500 in connec-
tion with its investment in the Indiana and Yates properties.
Had Shatar discussed the red flags with Kermanian, it could
have learned Kermanian himself (along with others) was pool-
ing funds to invest in the Yates property in exchange for a se-
cured interest, and that his investment pre-dated Shatar’s, po-
tentially undercutting Shatar’s first-position secured interest.
Finally, Shatar knew that the Yates purchase closed before
it invested, so by operation of record notice—notice of the in-
formation kept by the office of the recorder of deeds or regis-
trar, imputed to all purchasers and mortgagees—it is charged
with knowing that no recorded mortgage was on file. Alma-
zan, 2023 IL App (1st) 220794, ¶ 25. The lack of any recording

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20 No. 24-2254
itself was a red flag necessitating follow-up, but Shatar failed
to inquire further.
We do not fault (nor did the district court) Shatar for fail-
ing to uncover EquityBuild’s fraud or the broader Ponzi
scheme. But when presented with evidence suggesting its pri-
ority interest could be in jeopardy, Illinois law required Sha-
tar to follow up. We hold that the district court did not err in
finding that Shatar was on inquiry notice as to the individual
investors’ interest in the Yates property. We turn next to the
Indiana property.
2. Shatar’s Inquiry Notice Regarding the Indiana Property
It is undisputed that Shatar executed its mortgage on the
Indiana property before the individual investors executed
theirs. But the district court determined that the individual
investors had an equitable mortgage on Indiana before Sha-
tar’s mortgage. As to the Indiana property, we agree with the
district court’s conclusion that Shatar was on inquiry notice of
the individual investors’ equitable mortgage.
An equitable mortgage arises when “money is loaned or
credit given in reliance upon the security of property of the
debtor, but pledged by him in such manner as not to be en-
forceable as a mortgage at law.” Wilkinson v. Johnson, 29 Ill. 2d
392, 398–99 (1963). An equitable mortgage requires that a
written agreement evince an intent that “the property therein
described is to be held, given, or transferred as security for the
obligation.” Hibernian Banking Ass’n v. Davis, 295 Ill. 537, 544
(1920). A second-in-time mortgagee may be charged with in-
quiry notice of an equitable mortgage if presented with “a se-
ries of facts that should have led it to inquire further before”

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No. 24-2254 21
proceeding with the mortgage. US Bank Nat. Ass’n v. Vil-
lasenor, 2012 IL App (1st) 120061, ¶¶ 64, 71.
Intent that a written instrument should serve as an equita-
ble mortgage must be shown by “clear, satisfactory and con-
vincing evidence.” Wilkinson, 29 Ill. 2d at 399. Beginning in
December 2016, EquityBuild solicited investments for the In-
diana property, and provided each individual investor with a
signed collateral agency and servicing agreement, unsigned
mortgage, and promissory note. The district court found that
these documents evinced an equitable mortgage on the Indi-
ana property in the individual investors’ favor, and we agree.
First, the promissory note was dated February 6, 2017, and
provided that the individual investors’ loans would be se-
cured by a mortgage in the Indiana property, listing that
property’s full address. Each individual investor in the Indi-
ana property signed Exhibit A to the promissory note, which
documented the principal amount of each loan and the ex-
pected monthly interest payment. Second, the unsigned mort-
gage listed the aggregate amount of the individual investors’
loan and specifically identified Indiana as the property in
which an interest was being granted. A final page of the mort-
gage was signed by each individual investor with the percent-
age of the total loan and the amount of monthly interest to be
received. Third, the December 27, 2016 collateral agency and
servicing agreement (identifying EquityBuild and each indi-
vidual investor as parties thereto) referenced the February 6,
2017 promissory note and defined “Mortgage” as “ha[ving]
the meaning specified for such term in [the] Note,” and “Col-
lateral” as “ha[ving] the meaning specified for such term in
[the] Mortgage.”

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22 No. 24-2254
Taken together, these documents show that the individual
investors’ loaned funds were intended to be secured by the
Indiana property. The district court thus did not err in finding
that the individual investors had a preexisting equitable mort-
gage in Indiana when Shatar invested. Next, we analyze the
district court’s determination that Shatar was on inquiry no-
tice of that equitable mortgage.
First, Shatar made one loan with the expectation that both
the Yates and Indiana properties would secure it. As with the
Yates property, the district court determined that Shatar’s
background understanding of EquityBuild’s business model
(discussed above) was relevant to inquiry notice.
Second, and specific to the Indiana property, the district
court found that Shatar knew that EquityBuild would be re-
ceiving cash at the closing of the purchase, which would
strike a reasonably diligent purchaser as unusual. “[E]very
unusual circumstance is a ground of suspicion and demands
investigation.” Reed, 379 Ill. at 592. EquityBuild receiving
$86,000 in cash at closing when Shatar believed its loan was
being used to buy the Indiana property should have been
“enough to excite attention.” Id. As with the Yates property,
this occurrence, especially given EquityBuild’s broader busi-
ness model, should have given Shatar pause that there may
have been other funding sources potentially imperiling its
priority interest.
Third, had Shatar pressed EquityBuild about other invest-
ment sources, the documents outlining those investments
would have alerted it to the equitable mortgage. Those docu-
ments—the individual investors’ promissory notes, mort-
gage, and servicing agreements applicable to the Indiana
property—clearly confirm the equitable mortgage. But Shatar

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No. 24-2254 23
never asked about other investment sources, let alone for
these documents. Accordingly, the district court did not err in
determining that Shatar was on inquiry notice of the individ-
ual investors’ equitable mortgage in the Indiana property.
Given that the district court did not err in finding that Sha-
tar was on inquiry notice of the individual investors’ interests
in the Yates and Indiana properties, it properly determined
that the individual investors have priority interests in the pro-
ceeds from the sale of both properties.
D. Shatar’s Challenge to the Mode of Distribution
Finally, Shatar also challenges the district court’s distribu-
tion plan, appealing the decision to limit claimants’ recoveries
to their initial principal, less distributions previously re-
ceived, and to disallow interest, fees, penalties, and costs.
According to the district court’s distribution order, the ac-
counts containing the proceeds from the sale of the Yates and
Indiana properties hold $564,284.59 and $1,789,813.98, respec-
tively. The individual investors’ corresponding secured
claims on those properties exceed the proceeds and total
$2,689,293.00 and $2,782,692.60. After making distributions to
the individual investors with priority, there will be nothing
left to distribute to Shatar. We thus are unable to order any
relief that would benefit Shatar on this issue. Accordingly, we
decline to address it.
III. Conclusion
Because the district court did not err in determining that
Shatar was on inquiry notice of the individual investors’
preexisting interests in the Yates and Indiana properties when
it invested, we AFFIRM.

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