He defrauded 800+ investors through fake commercial property deals
A New York-based real estate developer has been sentenced to more than seven years in federal prison for defrauding over 800 investors out of $62.8 million through a fraudulent commercial real estate scheme involving fake deals and misuse of investor funds.
Elchonon “Elie” Schwartz, 46, former CEO of Nightingale Properties, was sentenced to 87 months in prison by a federal judge in the Northern District of Georgia after pleading guilty to wire fraud in February. He was also ordered to pay over $45 million in restitution.
“Schwartz’s greed was boundless,” said US Attorney Theodore Hertzberg. The FBI described the case as a “callous abuse of investor trust.”
Between May and November 2022, Schwartz raised tens of millions of dollars through the popular real estate crowdfunding platform CrowdStreet, promoting two high-profile but ultimately fictitious projects: a $54 million acquisition of the Atlanta Financial Center in Georgia and an $8.8 million recapitalization of a mixed-use development in Miami Beach, Fla.
CrowdStreet marketed Schwartz as a “top-tier sponsor” with a claimed $10 billion track record, helping him secure investments from retail participants, including doctors, nurses, retirees, and small business owners, many of whom contributed between $25,000 and $250,000.
Investors were assured their funds would be kept in segregated escrow accounts and used only for the advertised transactions. However, prosecutors revealed that nearly all funds were funneled into Schwartz’s personal bank and brokerage accounts instead.
Rather than deploying the capital into real estate, Schwartz used investor money to fund luxury purchases, including a Grönefeld 1941 Remontoire watch worth $120,000, risky stock option trades, and payroll expenses at other failing properties in his portfolio. Neither the Atlanta nor Miami projects closed, and by mid-2023, both Nightingale subsidiaries filed for Chapter 11 bankruptcy.
A trustee appointed by CrowdStreet has since been working to recover the funds. However, less than 20% has been returned so far.
The sentencing has drawn criticism from victims, who say the damage inflicted by Schwartz far outweighs the time he will serve.
“It feels like he’s too wealthy and too connected. He’ll walk away and do it again,” said Craig Leva, a Chicago businessman who lost money in the scheme.
While prosecutors had recommended a sentence of 78 to 97 months based on Schwartz’s cooperation and lack of prior offenses, his legal team sought probation, citing financial strain and pressure following the post-pandemic real estate downturn.
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Schwartz, who now works as a consultant, claimed in a court letter that he was remorseful and acted out of desperation. He has also aligned with the Aleph Institute, a nonprofit that supports incarcerated individuals within the Jewish community.
Efforts to compensate victims have been hindered by Schwartz’s reluctance to liquidate assets. Though he agreed to sell his $18 million Manhattan penthouse, he and his family continued to reside in the unit, prompting the bankruptcy trustee to sue for eviction. A judge has since ordered the family to vacate by May 21 or face a $10,000 daily contempt fine.
Schwartz also defaulted on a repayment agreement after making a single $3 million payment, delaying the recovery process.
The Securities and Exchange Commission (SEC) has filed a separate civil suit accusing Schwartz of securities fraud tied to a $6.4 million stock purchase, which federal officials labeled a “reckless attempt” to recoup investor losses.
“I’m okay losing money in a deal — that’s a risk I understand,” said Andrew Doyle, an investor from Atlanta who lost over $70,000. “But this wasn’t a deal gone bad. This was outright fraud.”
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