Nightingale's Elie Schwartz To Face Federal Charges As Soon As Next Week

Nightingale Properties CEO Elie Schwartz is expected to face federal criminal charges next week for his role in allegedly embezzling $54M from crowdfunding investors.

Schwartz is scheduled to be arraigned the morning of Dec. 4 in the U.S. District Court for the Northern District of Georgia, Bisnow has learned. 

U.S. Magistrate Judge Regina Cannon confirmed in a phone call Tuesday afternoon that she is scheduled to hear the Department of Justice bring charges against Schwartz in her Downtown Atlanta courtroom.

The DOJ's fraud department and the U.S. Attorney's Office for the Northern District of Georgia are investigating Schwartz, according to a letter sent by the DOJ to investors and obtained by Bisnow.

It is unclear what charges Schwartz is facing or when an indictment against him could be unsealed. The U.S. attorney's office declined to comment, and the Justice Department didn't respond to requests for comment.

The court date is the first time federal investigators will make public their investigation into Schwartz, whom CrowdStreet accused last year of misappropriating $54M from investors in two property deals Nightingale raised equity for on the platform.

Schwartz didn't reply to messages seeking comment.

“This arraignment marks a significant milestone,” CrowdStreet said in a statement posted on its website. “While the presumption of innocence remains until proven guilty, we are heartened to see the judicial process moving forward.”

Nearly 1,000 CrowdStreet investors put a minimum of $25K each into two investment vehicles controlled by Schwartz to fund the deals. Nightingale raised $54M to purchase the 915K SF Atlanta Financial Center office complex in the Buckhead neighborhood of Atlanta for $182M, then raised $8.8M in equity to recapitalize and renovate an office building Nightingale already owned in Miami Beach. 

While Nightingale raised that money over the course of the summer and fall of 2022, neither deal closed. In May 2023, CrowdStreet told investors in the funds that it couldn't account for the whereabouts of their money, Bisnow first reported.

CrowdStreet, which didn't require that its customers' investments be placed into escrow, appointed an independent fiduciary to take over the two investment entities Schwartz had controlled. That fiduciary, Anna Phillips, put those entities into bankruptcy in July 2023 and revealed to investors that $54M was missing.

BakerHostetler partner Jorian Rose, the attorney representing the entities in bankruptcy court, declined to comment. 

The crowdfunding platform said it had “directly cooperated with and provided substantial support to federal authorities to build the case against those responsible.”

Through the bankruptcy process, more information about what Schwartz allegedly did with the missing millions came to light. He was found to have bought $12M in stock and stock options in First Republic Bank in the weeks before it failed, spent $5.5M to pay off credit cards and buy luxury watches, and diverted at least $23M to third parties, according to the professionals hired to manage the bankruptcy process.

Schwartz has been silent throughout the process, but he did sign a settlement agreement in October 2023 with Phillips, agreeing to pay back the CrowdStreet investors in installments over three years by selling his assets to raise the cash. He made the first $3M payment in January but hasn't made one since.

His attorneys quit representing him in September, citing a lack of payment. He has listed his Manhattan penthouse and New Jersey mansion for sale, asking for a combined $23M, but neither property has found a buyer.

Nightingale amassed a real estate portfolio spanning millions of square feet of office space, primarily in New York City and Philadelphia, but many of its properties have fallen into distress or been taken over by lenders amid the decline in property values.

Phillips said on a webinar with the burned CrowdStreet investors in August 2023  that federal investigators at the Justice Department were looking into Schwartz's actions. She said last month that many investors were expressing frustration at the lack of action by federal authorities.

“A couple of you have asked, ‘Why the hell isn’t he in jail yet?’” Phillips said on the Oct. 18 webinar, a recording of which was obtained by Bisnow. “The answer is that charges can only be brought under criminal law that result in prison time, and that can only be pursued by the government.”

The news that prosecutors expect to bring charges against Schwartz next week comes as a relief to the investors, who have been waiting for nearly two years to see their money returned. 

“It's about time,” Joe Wojciechowski, an attorney with Stoltmann Law Offices who is representing 16 investors in the deals in a dispute against CrowdStreet, told Bisnow in an email Tuesday afternoon.

“As alleged, Schwartz’s misconduct arose to criminality, and although innocent until proven guilty, the fact that he was able to do what he allegedly did with investor money, which was raised through CrowdStreet, is simply incredible.”