Nightingale CEO Elie Schwartz Charged With Wire Fraud

Prosecutors charged embattled Nightingale Properties CEO Elie Schwartz with a single count of wire fraud at a federal courthouse in Atlanta Wednesday morning.

A New York City-based real estate executive who has gained infamy for allegedly embezzling more than $50M from investors on the crowdfunding platform CrowdStreet, Schwartz was represented by a public defender at an arraignment hearing in the U.S. District Court for the Northern District of Georgia at the Richard B. Russell Federal Building.

Schwartz sat stone-faced, wearing a blue plaid suit and a yarmulke, as U.S. Magistrate Judge Regina Cannon read the charge. His attorney, Colin Garrett, a staff attorney with the Federal Defender Program in Atlanta, pleaded not guilty on Schwartz's behalf.

Christopher Huber, assistant U.S. attorney for the Northern District of Georgia, said in court that Schwartz raised $62.8M from accredited investors to fund investments in office buildings in Atlanta and Miami Beach. Rather than close on those deals, Schwartz “diverted the money to pay other investors and for personal use,” Huber said.

The wire fraud charge stems from a $30K wire transfer from a JPMorgan Chase account to a Bank of America account in California, Huber said. The millions Schwartz raised on CrowdStreet for the deals were held in JPMorgan accounts, according to bankruptcy court filings.

The Justice Department unsealed a seven-page charging document following the hearing, outlining a series of financial transfers it says Schwartz made after raising the money on CrowdStreet between May 2022 and March 2023.

While the charge appears to be related only to the $30K bank transfer — one of several payments sent to a luxury watch dealer for a Grönefeld 1941 Remontoire watch, according to the charging document — prosecutors also claim Schwartz transferred more than $12M to a brokerage account he controlled to fund stock and options trades in First Republic Bank and Credit Suisse amid last year's banking crisis. 

Of the $6.9M in bank stock trades prosecutors detailed in the filing, Schwartz lost all but about $400K within months.

Schwartz also funneled money from the CrowdStreet investors to several bank accounts he controlled, including $500K to cover payroll expenses for his other commercial real estate businesses, prosecutors claim.

Huber declined to comment following the hearing, as did Matthew Sullivan, a trial attorney with the DOJ's criminal division who is also prosecuting the case.

Schwartz waived his right to a grand jury hearing, an indication that he may have struck a plea deal with prosecutors or is avoiding other charges that could have been determined by a grand jury.

He didn't answer questions from a Bisnow reporter at the courthouse, and Garrett, his attorney, declined to comment.

The charge only takes aim at a fraction of Schwartz's alleged misdeeds. He is accused of misappropriating $54M of the $63M he raised across two 2022 CrowdStreet campaigns, one to purchase the Atlanta Financial Center in Buckhead — less than 10 miles from the courthouse — and another to refurbish the Lincoln Place office building in Miami Beach.

Nearly 1,000 CrowdStreet investors put a minimum of $25K each into the two investment vehicles controlled by Schwartz to fund the deals. In May 2023, CrowdStreet told investors in the funds that it couldn't account for the whereabouts of their money, Bisnow first reported.

CrowdStreet 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 Schwartz had drained all but $127K of the $54M those accounts held.

Phillips and her team of lawyers and accountants have spent the past year and change trying to claw back that money. Schwartz signed a settlement deal in October 2023, agreeing to pay back the investors in quarterly installments. He made one $3M payment in January and hasn't made a payment since.

A bankruptcy judge ruled in May that Phillips, on behalf of Nightingale's spurned investors, could go after Schwartz's assets, including his Manhattan penthouse and a New Jersey mansion.

“[Schwartz] has been working with the trustee and cooperating with the government in their investigation,” Garrett told the judge Wednesday. 

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

Wednesday’s hearing was the first official act in the saga by the DOJ, which has been investigating Schwartz for more than a year. It is unclear when or if other charges might be filed.

When Bisnow reported last week that Schwartz was expected to be charged, CrowdStreet issued a statement saying the arraignment “represents a critical step forward in holding accountable those who engaged in fraudulent activities that caused harm to many, including CrowdStreet, our members, and our employees. As victims ourselves, we share in the frustration and pain this situation has caused.”

Cannon ruled that Schwartz could be released pending a $20K signature bond, which doesn't require him to pay any money upfront.

As part of his pretrial release, Cannon told Schwartz that he was to keep the court informed of any changes to his phone number or address, that he was to avoid contact with any victims or witnesses, attend all court hearings, and avoid breaking federal or state laws, or he will face up to 10 years in prison and a $250K fine. 

“I will instruct you to adequately seek employment,” Cannon told Schwartz during the hearing.

Cannon also required him to surrender his passport and remain in the U.S.

Garrett said Schwartz isn't a flight risk and is “a lifelong resident of New York.”

“He’s got four kids and one on the way,” Garrett said. 

UPDATE, DEC. 4, 5:35 P.M. ET: This story has been updated with information from the criminal information filing from the Department of Justice.