- Nightingale Properties CEO Elie Schwartz is set to be sentenced in Atlanta for wire fraud after misappropriating $63M from over 800 investors on the CrowdStreet platform.
- Prosecutors have recommended a sentence of roughly seven years, citing Schwartz’s cooperation, while victims demand the maximum 20-year sentence, calling the scheme “flat-out fraud.”
- Only 13% of investor funds have been returned, and Schwartz has stalled on selling personal assets, including an $18M Manhattan penthouse.
- Victims say they experienced significant financial hardship, and federal guidelines could support a harsher sentence if the judge agrees.
The Final Chapter—Or Not
Real estate developer Elchonon “Elie” Schwartz is facing his day in court after pleading guilty to a $63M fraud scheme that rocked the real estate crowdfunding sector. The CrowdStreet fraud unraveled a key vulnerability in the online real estate investment space. His sentencing on Monday in Atlanta could result in up to 20 years in prison—but he’s asking for probation, per Bisnow.
The Nightingale Properties CEO raised tens of millions via CrowdStreet in 2022, ostensibly to fund deals like the Atlanta Financial Center and Lincoln Place in Miami Beach. But instead of closing those transactions, Schwartz used investor funds on luxury watches, stocks, and to cover expenses at other struggling assets.
Victims Push Back
For Dr. Padma Sripada, who lost $75K, Schwartz’s story of redemption rings hollow. “If he doesn’t return the money to the investors, I think he should stay in jail,” she said. Like many victims, she sees his cooperation with prosecutors as insufficient without financial restitution.
Investors, ranging from healthcare professionals to small business owners, say they’ve only seen 13% of their money returned. An independent trustee, Anna Phillips, has been tasked with recovering assets, but progress has been slow—and Schwartz has already defaulted on a legal settlement reached last year.
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The Penthouse Problem
Schwartz’s actions since his guilty plea are fueling outrage. Despite agreeing to sell his $18M Manhattan penthouse, court filings show he and his family never moved out, prompting an eviction lawsuit. Last week, a bankruptcy judge ordered him to vacate by May 21—or face $10K daily fines.
Legal experts say his continued occupation of the property undercuts his claims of remorse and could influence the judge’s sentencing.
A Broken System?
Federal prosecutors have asked for a sentence at the low end of guidelines—about 6.5 years—citing Schwartz’s cooperation and lack of a criminal record. But many victims and legal analysts say that doesn’t go far enough.
“He’s never going to do 20 years,” said former prosecutor Simon Gaugush, who noted that the judge will weigh not only Schwartz’s cooperation but also the economic impact on victims. At least 15 investors have claimed substantial hardship, including delayed retirement and taking on debt.
What Comes Next
The CrowdStreet fraud has left investors in limbo. Restitution remains uncertain. Schwartz has repaid a fraction of the funds, and liquidation of his assets could take years. While the DOJ’s Financial Litigation Unit could take over enforcement, it’s likely that trustee Anna Phillips will continue leading the charge.
With sentencing imminent, victims like investor Elisha French say actions speak louder than courtroom apologies: “His actions, especially with the penthouse, to me, have shown he has not learned one single thing. And when he gets out, he’s going to do the same thing.”.
Why It Matters
Schwartz’s case has rattled confidence in real estate crowdfunding, a fast-growing investment channel. The fallout from the Nightingale scandal has triggered calls for tighter safeguards, as investors now question how platforms like CrowdStreet vet sponsors and protect capital.
