Nightingale CEO Elie Schwartz Pays Back $3M Of Misappropriated CrowdStreet Funds

At the eleventh hour, Nightingale Properties CEO Elie Schwartz made the first installment of the payment plan he agreed to in the fall as part of a settlement to pay back CrowdStreet investors whose money he misappropriated.

Now Schwartz has some $50M more to go.

Schwartz made a $3M payment on Tuesday — the final day before he would have been declared in default, per the terms of the settlement agreement — Anna Phillips, the special fiduciary overseeing the entities created for Nightingale's two failed CrowdStreet deals, said in a message obtained by Bisnow.

Phillips informed the hundreds of CrowdStreet investors who put cash into failed deals of the payment in a Tuesday evening email. Schwartz missed the initial payment deadline of Jan. 2, but as part of the settlement deal he struck, he had a 10-business-day grace period to make the payment, along with a 1% late charge. The grace period was set to end on Tuesday.

The payment is part of a grand settlement that Schwartz reached with Phillips and attorneys with Baker Hostetler, who are representing the investors in two failed offerings on CrowdStreet.

The settlement requires Nightingale's CEO to pay $3M every quarter until he repays in full the roughly $53M he misappropriated from two CrowdStreet campaigns launched in 2022 to buy the Atlanta Financial Center office complex and recapitalize his Lincoln Place office building in Miami Beach.

Schwartz is now due to pay the next installment by March 31.

“We are pleased that Mr. Schwartz has made the first installment payment, and our plan remains structured in a manner that allows us to pursue all feasible avenues of recovery of funds,” a CrowdStreet spokesperson said in an email to Bisnow. “We will continue to monitor the situation closely and advocate for our investors at every stage.”

Despite the payment, Phillips told investors in the email that she isn't disbursing the funds to the investors, who paid at least $25K for what they were told was equity in discounted trophy office buildings.

“I will hold off making any distributions to investors from funds received at this time, until we have more visibility on the magnitude and timing of future payments to be made by Mr. Schwartz to the estate,” Phillips wrote in the email.

Eli Johnson, a Chicago-based investor who put $25K of equity into the Atlanta Financial Center crowdfunding campaign, said Phillips' wording in the email didn't give him confidence that all of his money would be repaid.

“Obviously, there’s some doubt in his ability to pay. That’s my reading of it,” Johnson said. “He was able to scrape together and come up with $3M. Any money is better than no money. The fact that it’s late and that it’s the very first payment definitely creates a sense of doubt.”

The other payments he makes, scheduled for quarterly installments over the next three years, will be determined by the outcome of the sale of a variety of assets, including Schwartz’s Manhattan penthouse at 1 West End Ave., a mansion in Englewood, New Jersey, jewelry, watches and art.

Nightingale also has been attempting to sell Lincoln Place at 1601 Washington Ave., but a deal to sell the 160K SF office building for $82M fell apart late last year. 

The settlement deal, struck as part of the bankruptcy proceeding for the investment entities, was intended to be the resolution to the saga of the missing millions. Nightingale raised a combined $63M for the investments, and the Atlanta Financial Center deal from May 2022 was the biggest campaign in CrowdStreet's history to that point.

Those deals never closed, and last spring CrowdStreet tapped Phillips to take over the entities created for those investments and investigate their bank accounts. She determined that Schwartz had withdrawn all but $126K. Phillips then put the entities into bankruptcy.

She and a team of forensic accountants found that Schwartz had misappropriated the funds and used them for other business ventures and his personal expenses, including the discovery that he put $12M into First Republic stock and options in the weeks before the bank’s historic collapse, Phillips previously told investors.