Elie Schwartz Misses Deadline For $3M Repayment To Investors He Allegedly Defrauded

The embattled leader of Nightingale Properties has failed to make good on his plan to pay back hundreds of crowdfunding investors who he was accused of swindling $50M from on two failed real estate deals. 

Nightingale CEO Elie Schwartz had a deadline of March 31 to pay the second $3M installment as part of a settlement agreement he signed last year. The settlement grants him a 10-day grace period to make a late payment, and Schwartz eventually made the first $3M payment within that period in January after missing the first installment deadline on Dec. 31.

But as of April 12, the second payment “has not been received in whole or in part,” according to a letter sent to investors and obtained by Bisnow by Anna Phillips, the manager of the entities Schwartz created for the property deals.

There were more than 600 investors in Nightingale's campaigns on the real estate crowdfunding website CrowdStreet, who each invested tens of thousands for a piece of a prominent Atlanta office complex and a Miami Beach office building. Phillips told investors that she will provide more details in an update next week.

“We will of course update investors in the meantime if any or all of the second [installment] is received prior to the webinar,” Phillips said in the letter Friday afternoon. “Please know that we, and your investor committee, are hard at work and laser-focused on maximizing recovery on your behalf.”

Schwartz could now be considered in default of the settlement, but Phillips didn't outline any steps she would take. Previously, Phillips said that Schwartz was “signed and bound” to the settlement agreement to repay investors in quarterly installments over three years. The settlement allows the investment entities she manages to place liens on all of Schwartz’s assets, including his personal residence, commercial properties, jewelry, watches and art. 

“The bottom line is that even if he defaults under the settlement agreement, we’re going to be in a much better position than we are in today in terms of our ability to recapture assets,” Phillips told investors in January. 

The Nightingale fiasco is one of the most high-profile incidents of commercial real estate deals gone wrong in the age of online crowdfunding.

Nightingale raised $54M from investors in a bid to acquire the 915K SF Atlanta Financial Center office complex in Buckhead in a campaign that launched in May 2022. That November, it raised roughly $9M to renovate and recapitalize 1601 Washington Ave. in Miami Beach, which was vacated after Starwood had previously used it as its headquarters.

But neither deal closed, and in the next year CrowdStreet subsequently told investors it couldn't account for where the funds were located — they had gone directly into LLCs controlled by Schwartz rather than being placed in escrow — and accused Schwartz of misappropriating the money.

Those LLCs were handed over to Phillips in the spring, and she put them into bankruptcy in July. During the restructuring process, she and a group of forensic attorneys determined that Schwartz had siphoned millions into his own account and used them to pay for jewelry, diverted them to other investments and gambled $12M on First Republic Bank stock and options before it failed. Less than $150K remained in the accounts when they were taken over.

Phillips didn't respond to a request for comment, nor did BakerHostetler partner Jorian Rose, who is representing the CrowdStreet investors in bankruptcy proceedings. An attorney and spokesperson for Schwartz didn't return calls seeking comment.

Schwartz agreed to the repayment settlement in October. In that agreement, it was disclosed that he was under contract to sell 1601 Washington and repay the investors in that fund, but the deal fell apart in January. He also agreed to list his Manhattan penthouse and sell his New Jersey mansion. 

It's unclear if the penthouse at 1 West End Ave. has been placed on the market. The house, 320 Mountain Road in Englewood, was put on the market Sept. 7 seeking $4.5M. It is still unsold, having cut its asking price to $4.1M on March 18.