Nightingale’s Elie Schwartz has been sentenced for his role in the CrowdStreet fraud scandal.
A U.S. District judge handed Schwartz an 87-month prison sentence, capping off one of the largest known fraud cases in real estate crowdfunding history, Bisnow reported. The decision elicited gasps from Schwartz’s supporters in the courtroom, though not from the developer himself.
“You trusted me with your hard-earned money, and I betrayed your trust,” Schwartz told the victims who attended the hearing.
“The conduct was motivated by greed and personal reward,” Judge Steven Grimberg said while handing down the sentence.
The sentence landed in the middle of federal prosecutors’ requested 78-to-97-month sentence; prosecutors cited Schwartz’s lack of a criminal history and his cooperation with investigators in making that recommendation. Schwartz faced a maximum of 20 years.
In February, Schwartz pleaded guilty to wire fraud for his role in a multimillion-dollar crowdfunding scandal. Roughly 800 investors sent Schwartz about $62.8 million for real estate investments through CrowdStreet that he ultimately diverted for his own use, according to federal prosecutors.
About $54 million was intended for projects such as the acquisition of an Atlanta office complex. The rest was targeted for a recapitalization of a Miami Beach office building.
The investor funds were supposed to be held in bank accounts exclusively earmarked for those properties. But CrowdStreet failed to hold those funds in an escrow account and Schwartz siphoned them for personal use.
Schwartz settled with investors in October 2023 and agreed to pay $54 million in quarterly installments by selling off the Miami Beach office property and placing liens on other assets, though, he defaulted by the time the second payment came due.
“After nearly two years, we are pleased that, with today’s sentencing, he has finally been held to account for the harm his misconduct caused Crowd Street’s members and employees, and that he will be prevented from harming investors in the future,” a spokesperson for CrowdStreet said in a statement.
Schwartz was not taken to prison, but will report possibly to a penitentiary in the New York area, close to his wife and children, including a newborn baby. The family is staying in an $18 million penthouse that Schwartz has yet to vacate and sell to make investors whole, which a bankruptcy judge has twice ordered him to do.
— Holden Walter-Warner