New York law required the deposits in escrow. 427 Marcy Avenue's developer spent $6.715 million of them.

Seventeen people signed contracts for condominiums at 427 Marcy Avenue in Williamsburg, paid a combined $6.715 million in deposits, and spent years without apartments or their money. New York's Attorney General settled the matter on September 3, 2026, ordering restitution and a six-year securities ban against the developer. The statute that produced the recovery is the same statute whose enforcement model left those buyers waiting in the first place.

What New York law requires before a condo can be marketed.

Under General Business Law Article 23-A (the Martin Act), a developer may not offer, advertise, or sell a condominium unit in New York until the Attorney General's Real Estate Finance Bureau has accepted the offering plan for filing. The offering plan is a disclosure document covering the building's physical condition, the sponsor's financial background, projected common charges, and the terms on which units are being offered. No offer, no advertisement, and no contract are legal before that acceptance.

The Bureau's review, governed by 13 NYCRR Parts 17 through 25, evaluates whether the plan is complete, follows the required format, and contains the required disclosures. It does not certify that the representations in the plan are physically accurate. When a sponsor states that a building is newly constructed, the REFB review confirms the statement is present in the plan. It does not send an inspector.

The escrow requirement runs alongside the filing obligation. GBL §352-e(2-b) requires that every down payment collected from a residential buyer be held in a separate escrow account maintained by an independent agent. The funds are the buyer's property, not the sponsor's, until the transaction closes. 13 NYCRR §20.3 specifies what the escrow agreement must say and prohibits the agent from releasing funds without written authorization from both parties. The rule exists to prevent exactly what happened at 427 Marcy.

What 425 Marcy LLC did.

The AG's September 3, 2026 press release describes the violations plainly. Developer Ezra Unger, acting through 425 Marcy LLC, entered into contracts for 17 residential units, 3 commercial units, and 3 residential parking spaces at the Williamsburg address before the AG had accepted any offering plan for filing. Marketing began. Contracts were signed. Deposits were collected: $6.715 million in total from the residential buyers alone.

The deposits were then spent. Rather than holding the funds in a compliant escrow account as GBL §352-e(2-b) requires, 425 Marcy LLC used the money to pay project expenses. The buyers were left with neither apartments nor accessible funds. The AG's investigation ultimately found violations of GBL Article 23-A and Executive Law §63(12), the provision that authorizes the Attorney General to pursue repeated illegal business conduct.

The Real Deal and Brownstoner both covered the settlement on September 4, 2026. The Real Deal had also documented a foreclosure auction set for the Marcy Avenue project back in November 2021, indicating the development was financially troubled years before the AG enforcement action was resolved.

What the settlement delivers, and what it leaves open.

The settlement gives residential buyers two options. They may receive a full refund of their down payment with interest. Or they may apply the deposit as a purchase credit toward their original unit, once a new developer files a new offering plan and completes construction at 427 Marcy Avenue. Unger will pay up to $824,000 in civil penalties and is barred from offering or selling securities in New York State for six years. Residential offering plans are securities under the Martin Act, so the ban covers any future condo or co-op marketing.

Buyers who chose the purchase-credit path are now waiting on a new developer to accept filing obligations with the AG and finish the building. Nothing in the settlement sets a completion deadline. If the new development stalls, those buyers face another wait with no statutory mechanism to compel a result.

The pre-signing gap the settlement cannot close.

The harder question is how seventeen buyers reached the contract stage with a developer who had not met the legal prerequisites for marketing. The AG maintains a publicly accessible database of accepted offering plans. A buyer or their attorney can look up any building's filing status before signing a purchase agreement. That lookup is free and available. It is also entirely voluntary: no New York statute requires a real estate broker, a developer's sales representative, or even a buyer's own attorney to affirmatively confirm that an offering plan has been accepted before presenting a contract for signature.

The Martin Act is a disclosure and anti-fraud statute. It requires sponsors to make specific disclosures and to segregate buyer funds in escrow. It does not obligate any party at the closing table to produce evidence of compliance before the buyer signs. New York's Property Condition Disclosure Act (RPL §460 et seq.) already excludes condominium buyers from its seller-disclosure framework. The offering plan database fills part of that gap for new construction, but only if someone checks it.

A structural redesign is not legally complicated. Some states require sellers or brokers to produce a certificate of plan acceptance, or include plan status in the purchase agreement. Florida's post-Surfside reforms under Fla. Stat. §718.111 created mandatory registration databases with public-facing disclosures. New York's process runs through the REFB filing office. The database is public but sits outside the transaction workflow unless a party actively inserts it. That placement is a policy choice, not a technical constraint.

Three enforcement cases, one statutory ceiling.

The 427 Marcy settlement is the third Martin Act enforcement action this site has covered in detail, and each case illustrates the same statutory boundary from a different angle. At 135 Carlton Avenue in Fort Greene, the AG secured $230,000 after a sponsor described a renovated building as new construction and concealed structural foundation failures. At The Westerley, the AG recovered $700,000 after a private equity buyer acquired the sponsor entity at foreclosure and refused to pay the building's bills or transfer board control for two years. At 427 Marcy, the recovery reached $6.715 million because escrow funds were misappropriated at the contract stage, before any offering plan existed.

In each case, the Martin Act enforcement reached the financial harm. In each case, the harm was already complete before the enforcement action began. The AG cannot intercept a developer who markets before filing. The enforcement clock starts when a complaint arrives or an investigation opens, not when a buyer hands over a deposit. Between the moment of the violation and the moment of enforcement, the financial exposure accumulates and is often spent.

The REFB reviews several hundred offering plan submissions each year. It has no mechanism to detect illegal pre-filing sales, because those transactions do not enter the plan filing queue. The first signal in a case like 427 Marcy comes from buyers who eventually contact the AG after realizing they have no apartments and cannot recover deposits from a developer who has already spent them.

Bottom line.

The $6.715 million settlement is the Martin Act working as designed. The AG identified escrow misappropriation and pre-filing sales, built a case, and secured the largest residential deposit recovery in this series of REFB enforcement actions. Seventeen buyers are getting their money back with interest. Ezra Unger will not be marketing condominiums in New York for six years. That is the statute doing its job.

What the settlement cannot deliver is a pre-transaction check. New York gives condo buyers no mandatory verification step, no affirmative obligation on any party at the table to confirm an offering plan has been accepted, and no integration between the REFB filing database and the purchase-agreement process. The Martin Act reaches the fraud after the fact. It does not prevent buyers from handing money to a developer who has not cleared the legal prerequisites. That gap is open after this settlement, and no pending bill in Albany closes it.

Primary sources: AG press release, September 3, 2026 · Martin Act, GBL Article 23-A · GBL §352-e(2-b) (escrow requirements) · 13 NYCRR Parts 17–25 (REFB offering plan regulations) · RPL §460 et seq. (Property Condition Disclosure Act) · Fla. Stat. §718.111

Companion resources: The AG secured $230,000 from a condo sponsor. The structural gap remains. · The Westerley: PE firm, foreclosure, and the limits of the Martin Act · Why the NY AG can't help with most condo governance disputes · A six-year enforcement gap on condo offering plans ended July 1 · The NY LLC Transparency Act and condo sponsor disclosure · How to write an AG REFB complaint · The AG REFB jurisdiction gap · AG complaint tool