How Elie Schwartz Went From Rising Real Estate Star To Alleged Fraudster
Elie Schwartz rose from obscurity in Brooklyn to stake a claim on the skylines of Manhattan and Philadelphia — and then it all came crumbling down.
The CEO and co-founder of Nightingale Properties was charged with wire fraud on Dec. 4, a crime carrying a maximum 20-year prison sentence if convicted. Schwartz pleaded not guilty at an Atlanta federal courthouse, but waived his right to a grand jury indictment, an indication that a plea deal could be imminent.
He stands accused of defrauding hundreds of crowdfunding investors in two failed commercial real estate deals out of more than $50M. More than two years since the first signs of trouble emerged from his record-breaking CrowdStreet haul, little remains known about the true cause and scope of Schwartz’s troubles.
Beyond the roughly $50M he still owes as part of a settlement agreement with the investors in his CrowdStreet deals, Schwartz is on the hook for more than $14M in judgments from three lawsuits brought against him by lenders, according to court records.
In less than three years, Schwartz's reputation has been shattered.
He was a hotshot real estate investor touting a $10B track record and holdings up and down the East Coast. Now, he's an alleged fraudster who sat before a magistrate judge represented by a public defender and was told to “adequately seek employment” while he awaits trial.
Neama Rahmani, a former federal prosecutor who reviewed the government's charges, said the "vast majority" of fraud cases that are introduced with a waiver of indictment end in a guilty plea. A judge would then determine sentencing based on the severity of the crime.
“For this amount of fraud? The guidelines are pretty significant," Rahmani said in an interview last week. “Years and years behind bars.”
The Rise
Before he launched his real estate career, Elchonon Schwartz was running an IT consulting business, installing Microsoft servers, according to an archived version of Nightingale's website. Little else is publicly known about Schwartz's background — he lists no education or other work experience on his LinkedIn profile.
Nightingale was founded in Brooklyn in 2005, when Schwartz, who was brokering deals on the side, met Simon Singer, who worked as in-house counsel for a developer. The two hit it off and almost immediately started their own property investment firm.
“Elie is the classic entrepreneur — the kind of kid who made a mint selling and trading baseball cards and candy growing up. Who made a mini-business out of ordering 10 pizzas and selling it by the slice,” reads a bio posted to the real estate networking and fundraising platform Revere.
They acquired retail and office properties in Sun Belt states like Tennessee and North Carolina within their first decade working together, but soon turned their attention to bigger game. Between 2012 and 2017, they paid nearly $900M to buy office buildings in Philadelphia's urban core.
In 2019, Nightingale and partner Wafra Capital flipped the Coca-Cola Building at 711 Fifth Ave. — after buying it for $909M from the beverage giant — to Michael Shvo for a $29M gain. In press releases, Nightingale described itself as “regarded in the industry as one of the most agile, creative, and operationally savvy institutional-grade owner-operators.”
Wafra, now InterVest, is formerly a division of the Kuwait sovereign wealth fund Wafra Capital Group, but its investments in Nightingale were syndicated from high net worth Middle Eastern investors, The Real Deal reported.
InterVest also co-owns 300 Lafayette St. and 111 Wall St. in Manhattan, office buildings for which the partners paid a combined $300M.
When reached for comment Friday, InterVest CEO Michael Gontar said he was unaware of the fraud charge filed against Schwartz and referred Bisnow to a spokesperson, who declined to comment. A source familiar with their partnership said there is no longer a relationship between InterVest and Schwartz.
It is unclear how Schwartz and InterVest were initially connected. The pair made huge bets on the exact type of buildings that have lost the most value in recent years: outdated towers in urban centers with large vacancies in need of expensive upgrades.
Even after the pandemic hit, Schwartz charged forward. In October 2020, Nightingale bought The Whale, a seven-story Brooklyn industrial property, for $84M from Madison Realty Capital and JPMorgan Chase, planning to convert it to creative offices.
After acquiring the 1.2M SF building at 111 Wall in January 2020 for $175M, Nightingale and InterVest acquired the land underneath for $220M in July 2021 and raised a $500M debt package led by Pimco to redevelop the building and lease it at a comparative bargain to Midtown towers.
With interest rates at historic lows in early 2022, commercial real estate investing was as hot as it had ever been. However, institutional players had become more reluctant to invest in office buildings once remote work proved to be more persistent than expected.
Nightingale's last deal with InterVest was in 2021, the same year that Singer left the firm, although he still has stakes in some of the company's legacy assets.
Schwartz was undeterred, making his next move with a new equity partner: CrowdStreet.
The Austin, Texas-based crowdfunding platform emerged as one of the most popular vehicles for retail investors — flush with cash in the stimulus-fueled, early-pandemic economy — who wanted to invest in commercial real estate deals quickly over the internet. More than $1.2B was raised on CrowdStreet in 2021 alone.
Nightingale's first brush with the platform seemed to be an unmitigated success. It raised $25M in crowdfunding equity in January 2022 to fund its $130M purchase of the 480K SF office tower at 200 West Jackson Blvd. in Chicago.
“We are firm believers in the future of office,” Will Hutton, who was Nightingale's director of acquisitions, said in a press release announcing the deal.
CrowdStreet Managing Director Ilya Gamer said in a statement at the time that Nightingale's webinar presentation of its investment in 200 West Jackson was so impressive that the deal was oversubscribed "within two hours" and raised the $25M within days.
“Nightingale’s offering on CrowdStreet blew our performance expectations out of the water,” Gamer said in the statement.
Just a few months later, in May 2022, Nightingale would return to CrowdStreet with an even bigger deal: the 915K SF Atlanta Financial Center, a glassy office complex that towers over a highway in the city's tony Buckhead neighborhood.
Nightingale said it entered a contract to purchase the property from Sumitomo Corporation of America for $182M, a price that would have amounted to a $78M loss for the Japanese investment firm, and one that Nightingale told investors was a “rare opportunity to acquire a trophy office at a steep discount.”
CrowdStreet's chief investment officer sent prospective investors an email with the subject line: “$10B Enterprise Sponsor Brings Trophy Asset with Huge Potential in Hot Market.” The fundraising target was set at $16M.
By August, the firm had raised $63M toward the purchase, the most of any deal in CrowdStreet's history. But The Wall Street Journal reported that several investors had raised red flags about Nightingale's record — two past deals that had gone bad were omitted from its disclosures to CrowdStreet investors.
A Nightingale spokesperson dismissed the omissions as rare black marks on a largely sterling investment record, while a CrowdStreet spokesperson called them "benign." The deal was still expected to close by November.
Despite the inconsistencies revealed by the WSJ, Nightingale went back to the CrowdStreet well a third time, this time trying to pump equity into a building it already owned: 1601 Washington Ave. in Miami Beach. It set another $15M fundraising target but raised just $8.8M in that campaign, which closed in December 2022.
Then, everything began to unravel.
The Fall
The deal for the Atlanta Financial Center didn't close as predicted. By the following March, some investors started demanding refunds. Nightingale posted in a message on the CrowdStreet app, which was reviewed by Bisnow, that it was trying to get Sumitomo to agree to a reduced price as it worked to secure financing.
In late May 2023, CrowdStreet sent a letter to the increasingly impatient investors, telling them Nightingale was struggling with “changes in the debt market." A few days later, the platform dropped the bombshell: It couldn't verify the whereabouts of its investors' cash.
“CrowdStreet asked that Nightingale produce documents demonstrating that investor funds were in the bank account. Nightingale did not agree to that request,” read a May 31 letter sent to investors.
The platform pushed to remove Schwartz as manager of the investor accounts, and he acquiesced on June 7, but the damage was done.
By the time independent fiduciary Anna Phillips was appointed to take over the investment vehicles and placed them into bankruptcy a month later, just over $126K was left in their accounts. CrowdStreet hadn't placed the investor funds in escrow, a common step in real estate transactions, allowing Schwartz to use the equity however he pleased.
Then-CrowdStreet CEO Tore Steen told Bisnow at the time that the company would use escrow accounts for all deals from that point on, but he denied that his platform was responsible for the loss.
“This was not a crowdfunding issue, this was simple illegal behavior by a real estate developer,” he said in a July 18, 2023, interview. Steen was fired two weeks later.
Two of Schwartz's top lieutenants, Hutton and Avi Kollenscher, quit Nightingale around the same time. Kollenscher took a job at Capstone Equities in January — which was suing Schwartz at the time, The Real Deal reported — and Hutton now works for InterVest.
As Phillips and her team dug through the financial records of Schwartz's CrowdStreet funds, they gave investors updates on what he did with the money and told them they were in close contact with the Department of Justice. The paper trail they discussed was echoed in the Department of Justice's criminal information filed against Schwartz.
“From the moment we learned about this fraud, we have been unwavering in our commitment to transparency and justice. CrowdStreet uncovered the fraud and alerted federal authorities,” the company said in a statement posted to its website after Bisnow broke the news that Schwartz was scheduled for an arraignment hearing.
“To protect investors and uphold our principles, we provided substantial resources — millions of dollars — to initiate the appointment of an independent trustee to recover funds for victims. Additionally, we directly cooperated with and provided substantial support to federal authorities to build the case against those responsible.”
DOJ attorneys wrote that Schwartz put $12M into stocks and options in First Republic Bank and Credit Suisse, investments that were nearly a total loss. He diverted at least $1M to his personal bank account, used $500K for Nightingale payroll expenses and transferred $5M to an affiliate of Sumitomo, according to court documents.
Schwartz also paid $120K for a Grönefeld 1941 Remontoire watch, according to the DOJ, and a $30K wired payment for that purchase — transferred across state lines to a California watch dealer in March 2023 — was the transaction prosecutors zeroed in on for their wire fraud charge.
As the CrowdStreet scandal exploded into public view, defaults across his extensive real estate portfolio piled up, and lenders have chipped away at his holdings.
The 2.2M SF, two-tower complex at 1500 Market St. in Philadelphia — the city's largest office property, which Nightingale and Wafra bought for $328M in 2017 — has been in receivership since April 2023.
At 111 Wall, InterVest has partnered with a developer to pursue a residential conversion after the building's loan was sold, the foreclosure auction was canceled and Schwartz was “no longer involved” with the property, The Real Deal reported in April.
The Whale Building, in which InterVest did not have a stake, was lost to foreclosure last year. Nightingale handed the 15-story office building at 20 E. 46th St. to its lender in November.
The distress across Schwartz's portfolio has thrown into doubt what CrowdStreet investors, some of whom invested as much as $1M, will ever be able to collect.
Schwartz signed a deal in October 2023 to pay $55M back to those who invested in the Atlanta Financial Center and 1601 Washington campaigns. Weeks earlier, he found a buyer to pay $82M for 1601 Washington, which would have paid back the investors in that building in full.
That deal fell apart in a haze of lawsuits four months later. Schwartz only made a single payment in January before defaulting on the deal in April.
A month after the default, a bankruptcy judge ordered him to sell his two personal residences: an 11-bedroom mansion in Englewood, New Jersey, which he bought for $3.9M in December 2022 — while struggling to close on the Atlanta Financial Center deal — and a four-bedroom penthouse at 1 West End Ave. in SoHo he bought in 2018 for $17.9M.
As of Tuesday, the mansion, listed for $4.1M, hasn’t sold, and the apartment, listed for $19M in June, is "temporarily off market" as of last month, according to a StreetEasy listing.
As part of the settlement, CrowdStreet investors also have liens against the LLCs affiliated with several of Nightingale’s holdings: The Labs on 121, a 160K SF life sciences and office building in Harlem owned in partnership with Real Estate Equities Corp., plus three Philadelphia office towers — 1835 and 1635 Market St. and 1500 Spring Garden St. — all co-owned with InterVest.
Phillips warned investors in October that those liens might end up proving worthless, as senior lenders would have to get paid first, as could some of Schwartz's co-investors.
“Regarding the commercial real estate holdings, these continue to deteriorate in value and, frankly, any equity in the majority of them is at risk of being wiped out,” Phillips said on a webinar with investors.
One building that wasn't included in the settlement: 200 West Jackson Blvd., into which CrowdStreet investors put $25M of equity. CrowdStreet pushed to remove Nightingale, telling investors in that property it was “concerned that Nightingale may have acted inappropriately,” in managing the building, according to a July 20, 2023, letter reported by Bisnow.
The company admitted at the time clawing back a closed deal — financed with an $86M senior mortgage from Citibank and $17M in mezzanine debt — was complicated. A Nightingale affiliate still is listed as the owner of the building in Cook County property records, which show that its market value has fallen from $154M in 2022 to $109M this year.
"It's an ongoing situation that we are working to resolve and we continue to update our members with new developments as appropriate,” CrowdStreet told Bisnow in a statement Tuesday.
“As victims ourselves, we share in the frustration and pain this situation has caused,” the company said in its statement last month. “To the investors and stakeholders affected, we extend our deepest gratitude for your patience and resilience. The pursuit of justice is long and complex, but as this case progresses, we are reminded of why we stand firm in our values. We hope this moment serves as a reminder that, in time, the scales of justice do work.”
CrowdStreet investors aren't the only group that Schwartz has a legal obligation to repay.
A Manhattan judge ruled in April he had to pay JPMorgan Chase $10.6M after defaulting on a line of credit, plus attorneys' fees and post-statutory interest that accrues at 9%.
In another case, Schwartz was sued by an old friend, Dr. Daniel Samadi, from whom he borrowed $1M in June 2023. A judge ruled in September that Schwartz has to pay Samadi $1M plus interest of at least 15% from the initial date of the loan.
This summer, Schwartz confessed to not paying a $2M loan he borrowed from an entity called PPG Whale Building LLC, registered to a financial adviser with an address less than 2 miles from his New Jersey mansion. Schwartz signed a confession in June, admitting he failed to pay off the loan by its September 2023 maturity data. A judgment was entered against Schwartz in that case this past August.
Phillips' team has already clawed back some money, but even combined with Schwartz's lone payment, the funds are only cents on the dollar of what went missing. Now that Nightingale's CEO is at risk of a lengthy prison sentence, investors are worried they might not be repaid for years.
David Gutierrez, who invested $90K into Nightingale's Atlanta Financial Center deal, said he's only gotten 10% of his money back. He said he was relieved that the Justice Department finally brought charges against Schwartz but a little disappointed when he learned the specifics.
“That's it?” Gutierrez said in a phone call Friday afternoon. “It’s good that they’re getting involved and applying a little pressure. I'm not sure what it’s going to do to collect the outstanding funds. I mean, if he’s in jail, he can’t do anything to generate income.”
Jarred Schenke contributed reporting for this story.
