Top NYC Real Estate Family Subpoenaed In Nightingale Properties Scandal
The family behind Jordache jeans has been drawn into the $60M Nightingale real estate scandal as the bankruptcy trustee seeks records of dealings it had with embattled CEO Elie Schwartz.
The entity representing hundreds of burned CrowdStreet investors has subpoenaed Nakash Holdings — the family empire that owns fashion brands such as Jordache, XOXO and U.S. Polo Assn. as well as commercial real estate around the country — for records related to any interactions with Nightingale and Schwartz, according to recent bankruptcy court filings. Schwartz has been accused of misappropriating millions of dollars.
The entity, led by trustee Anna Phillips, is seeking all documents and transaction data between Schwartz and Nakash and contact information on any co-investors, partners or lenders since Jan. 1, 2020.
News of the subpoena was first reported Monday by The Promote.
The Nakash family has a substantial commercial real estate portfolio, including Hotel Ocean — Miami Beach, The Villa Miami Beach, Showcase Mall in Las Vegas and the hotel Orchid Okeanos Israel.
Schwartz had a previous business relationship with Nakash Holdings.
In 2021, Nakash Bellevue LLC sued Schwartz for failing to pay back a $6M loan that passed the maturity date, according to the lawsuit filed in the New York Supreme Court. The parties settled the dispute in August 2022.
Nightingale began raising funds from CrowdStreet investors for the Atlanta Financial Center deal in May 2022, an effort that would be CrowdStreet’s single-largest fund-raise. CrowdStreet sent that money directly to Schwartz’s accounts instead of holding it in escrow until the real estate deal closed.
In copies of emails filed in the case, Nakash Bellevue LLC was connected to Nakash Holdings, which was conducting business with an entity affiliated with Schwartz called One Night Holdings LLC. Bisnow previously reported that Schwartz transferred $26.5M from the Atlanta Financial Center investors into One Night Holdings and personally siphoned off $19.2M.
The filing is the latest in which Phillips is seeking to lasso back CrowdStreet investor funds Schwartz was supposed to use to buy the Atlanta Financial Center office complex and recapitalize a Miami Beach office building, deals that never materialized. Clawback provisions allow bankruptcy courts to get money back that should have been considered part of the bankruptcy estate but were improperly transferred.
BakerHostetler partner Jorian Rose, who represents the two CrowdStreet bankrupt investor entities titled ONH AFC CS Investors LLC and ONH 1601 CS Investors LLC, declined to comment. Jordache Chief Marketing Officer Shaul Nakash and Nakash Holdings’ Ariel Nakash did not return emails seeking comment as of press time. A call to Nightingale Properties also was not returned.
Investors have already moved to seize Schwartz’s assets after the embattled CEO failed to make good on an October settlement agreement in which he was to pay back the investors all of the funds in installments over three years. Schwartz made the first $3M payment but didn’t make any additional ones, prompting the entities to take possession of watches and pieces of jewelry to be liquidated.
The CrowdStreet/Nightingale saga stretches back to June 2022, when the owners of a 915K SF office complex in Atlanta’s tony Buckhead district — Sumitomo Corporation of Americas — agreed to sell the glass-encased complex that straddles a major highway to Nightingale for a $78M loss. Nightingale turned to CrowdStreet and raised some $60M from small investors for its purchase and the recapitalization of 1601 Washington Ave. in Miami.
But a year after the deal was announced, it had failed to close and Phillips informed investors that Schwartz had misappropriated nearly all the funds he raised for personal and business expenses, including $12M diverted to buy stocks and options in First Republic Bank weeks before it failed.
There is an ongoing Department of Justice investigation and a U.S. Securities and Exchange Commission investigation into Nightingale and Schwartz, Phillips previously announced. And in February, a group of investors tangled in the deal filed an arbitration claim with the Financial Industry Regulatory Authority to collect more than $3M in damages from CrowdStreet and asked for an injunction that could bar CrowdStreet from continuing to conduct business.
The liquidating trust has already clawed back some of the investor funds given to third parties. In June, Sumitomo agreed to pay the liquidating trust the $3.25M it previously received from Schwartz, according to bankruptcy documents.
