I’ve come to their tax-haven sex mansion to hear their improbable story—how two sons of an ultrareligious Jewish neighborhood in Brooklyn witnessed the birth of a new kind of lending, made a fortune, and then saw it all come to an end. Not in the form of an FBI raid, but with Wall Street bankers paying millions to take over the action…
Zeines and Hurwitz made their money in a field that’s now called merchant cash advance. It’s a legal way to lend money to small businesses at interest rates higher than Mafia loan sharks once charged. Completely unregulated, last year it surpassed the U.S. Small Business Administration as a source of loans for less than $150,000, according to the industry newsletter DeBanked, one of the few places with reliable information. The business was developed a decade ago in a boiler room full of ex-Lubavitcher Jewish teenagers in downtown Manhattan. They figured out how to hook people such as florists and pizzeria owners with promises of fast cash and discovered just how ridiculous the profits could be—even if it meant driving their borrowers into bankruptcy.
Zeines was one of these guys. As I reported on the industry over the past year, he became my tour guide. A curly-haired 33-year-old with a cockeyed grin, he dresses like a tourist, in flip-flops and T-shirts, and speaks with a Brooklyn Yiddish accent that turns -ing into -ink. Zeines knows all the players and all the tricks to separate people from their money, but he styles himself an outsider, someone who appreciates the absurdities of Ivy League-educated financiers getting in on a seedy business.
Zeines kept telling me he was going to sell his company to a hedge fund for tens of millions of dollars. I didn’t believe him, but I told him if it ever happened it would make a good story. Then, one day this spring, I was shown a copy of a letter from Goldman Sachs. It was addressed to Zeines’s company. The bank was offering him $100 million.
In the Midwood neighborhood of Brooklyn, men in boxy black suits and black wide-brimmed fedoras speak in Yiddish under the elevated train. Young women block the sidewalk with double-wide strollers, wearing wigs to comply with a religious prescription for modesty. Zeines grew up here, the fifth of 10 children. His father worked as a wedding photographer. The family had so little money to spare that riding the subway was a treat.
All aspects of life were governed by religious rules. Never eat meat and dairy together. No electricity on Saturdays. Tie the left shoe before the right. High school meant Mir Yeshiva, an all-boys institution in the neighborhood. Zeines and other potential future rabbis pored over religious texts in Hebrew and Aramaic for hours each day in an unadorned auditorium full of wood desks evoking 19th century poverty. There was little instruction in math or English. Zeines was a good student, but as he got older, he started to feel as if adults cared more about the technicalities of religious laws than morals. He says he saw swindlers honored for their donations and fathers who could barely afford food buying pricey ceremonial artifacts to flaunt their piety. Zeines started breaking the rules. “The first cheeseburger,” he says, “was f—ing awesome.”
Zeines stopped his religious education and enrolled at Kingsborough Community College. There he met Hurwitz. Even though they’d grown up only minutes apart, they’d never crossed paths, because Hurwitz’s family followed a different rabbi. Zeines looked up to his new friend, who was two years older, 4 inches taller, and had seen the world—or at least more of it than he had. On a Birthright trip to Israel, Zeines got the nickname Bugsy, because he and Hurwitz were as tight as gangsters Bugsy Siegel and Meyer Lansky.
In 2005 they were working together at a group home for developmentally disabled adults, earning about $10 an hour. They liked the job but wanted a ticket out of Midwood. That November they found it, in the form of a fat, bald, flashy man named Sam Chanin.
Like Hurwitz, Chanin was raised in the Lubavitch sect, a Brooklyn-headquartered branch of Hasidic Judaism that sends adolescent boys into the streets to recruit Jews to the movement. People who’ve worked for Chanin say that, by the time he was in his 20s, he was using the persuasiveness he’d developed proselytizing to sell credit-card machines to stores door-to-door. It was a good business—salesmen got a cut every time a customer swiped a card—but once a neighborhood was saturated, it was hard to sell more.
Hurwitz was one of the first Lubavitchers Chanin hired for his new cash-advance brokerage, which he named Second Source Funding. The business took off. At the group home, Hurwitz bragged to Zeines that he’d made more than $15,000 in his first month selling loans. That was all Zeines needed to hear. He bought a suit and a copy of the Wall Street Journal, and took the subway into Manhattan to join Second Source’s growing crew. It was January 2006, and he was 23 years old.
Zeines wasn’t an “always be closing” natural like Hurwitz, who was put in charge of all the other salesmen after a year. But at Second Source, anybody willing to pick up a phone and pitch could make thousands a week. The Orthodox gossip mill caught on. Word spread from the brownstones of Crown Heights to the leafy streets of Borough Park. So many kids were applying for jobs that Hurwitz started doing group interviews. “If you’re not making 20 grand a month, you just don’t belong here,” Hurwitz says he’d tell the applicants…
Brokers who had the knack made more money than they’d ever imagined. Some would shave their beards, put away their yarmulkes, and go out on the town after they got a few paychecks. Others discovered whiskey and cocaine. “Ridiculous amounts of money are coming your way,” says Dovid Sandomire, one of the salesmen. “It’s like, ‘Let’s go spend $1,000 at the strip club. It’s all on me.’ ” Chanin got a blue Bentley and a driver. Hurwitz bought a tall wooden throne for his office and a life-size statue of a lion…
During an interview at a bar a few months earlier, I’d asked Zeines about his conscience. He said he didn’t see a problem with what he was doing. Pearl’s cash advances were expensive, he said, but it wasn’t like its customers had a lot of alternatives. And laws about interest rates seemed as illogical as the religious rules that he’d long since abandoned. “Going back to Biblical times, there was something dirty about charging for money,” he said. He held up his glass. “But a business owner can buy this beer for a dollar, mark it up eight times, and sell it to idiots like us, and no one cares.”
