Nightingale Properties CEO Elie Schwartz has been sentenced to 87 months in prison after orchestrating what prosecutors called the biggest fraud in real estate crowdfunding history.
U.S. District Judge Steven Grimberg handed down the sentence in Atlanta, also ordering three years of supervised release. Schwartz had pleaded guilty in February to one count of wire fraud after raising $63M from investors on the CrowdStreet platform in 2022, then diverting roughly $54M to personal luxuries — including a Miami condo, art, payroll at other properties and high-end watches.
Bisnow/created with assistance from ChatGPT
In a letter to the court, Schwartz expressed remorse and claimed to have “learned a valuable lesson,” vowing never to manage other people’s money again. Speaking in court for the first time, the 46-year-old Manhattan resident argued that avoiding prison would allow him to repay the $45.8M he still owes in restitution more quickly.
Schwartz, wearing a gray suit and yarmulke, appeared composed during the hearing at the Richard B. Russell Federal Building in Downtown Atlanta, where more than 20 friends and family members were in attendance. He embraced them during breaks and before the hearing began.
In his letter begging for leniency, Schwartz said if he received a probation-only sentence, it would be like Forrest Gump breaking free from his leg braces in the 1994 movie.
“You trusted me with your hard-earned money, and I betrayed your trust,” Schwartz said to the victims who attended the hearing. “I make no excuses for my actions. I hope to make enough money to make you whole.”
The Brooklyn-born real estate investor’s supporters in the courtroom let out a gasp when Grimberg issued the seven-year, three-month sentence. Schwartz stood still, not visibly reacting.
“The conduct was motivated by greed and personal reward,” Grimberg said after the sentence was handed down.
He added that he hopes the sentence scares off other investors considering fraud.
“To use the parlance of investors, you need to flip the ROI, because otherwise, rational people can make the decision it’s worth the risk if the consequences are going to be modest,” he said.
Bisnow/Jarred Schenke
The Richard B. Russell Federal Building and U.S. Courthouse in Downtown Atlanta
Prosecutors said in court filings that the sentencing guidelines call for a sentence of between 78 and 97 months, less than half of the maximum 20 years. They recommended the low end of that range, citing Schwartz’s cooperation and lack of a criminal history. More than a dozen of his victims told Bisnow this month that they were disappointed in the Justice Department’s recommended sentence.
Schwartz admitted that when he used CrowdStreet in 2022 to raise $54M to purchase the nearly 1M SF Atlanta Financial Center and $8.8M to renovate the Lincoln Place building in Miami Beach, he did so knowing he was going to access the funds despite signing an agreement to hold them in escrow.
While he claimed he always intended to repay investors, Assistant U.S. Attorney Kelly Connors said his decision to spend the investor equity was calculated greed.
“Here we have an incredible amount of loss,” Connors said. “This was Mr. Schwartz treating investor funds like his own personal piggy bank.”
Schwartz’s wife, Jacquelyn, pleaded to the judge to give her husband parole to allow him to remain home to help raise their new baby, along with the rest of their children.
“If there ever was a case for alternatives to incarceration, this would be it,” she said.
Schwartz wasn’t immediately taken into custody. Grimberg said he would set a date when Schwartz would have to report to prison, and he agreed to try to assign Schwartz to a penitentiary near his family in New York.
Neither Schwartz nor his attorney, public defender Colin Garrett, responded to questions as they exited the courtroom. Schwartz’s supporters also declined to comment on the ruling.
“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 CrowdStreet spokesperson said in a statement.
While Garrett discussed how Schwartz had cooperated with investigators, the fact that he is still living in his $18M penthouse was a point of contention throughout the three-hour hearing.
Anna Phillips, the trustee representing the CrowdStreet investors, testified before Grimberg issued the sentence that Garrett was being “disingenuous” about Schwartz’s cooperation because he continues to live in the penthouse despite agreeing to vacate and sell it to pay back his victims.
The bankruptcy judge overseeing the liquidation has now twice ordered Schwartz and his family to vacate the apartment.
The efforts Phillips and her team of attorneys and accountants have put in to try to evict him and claw back the money have racked up millions in legal fees to the victims’ trust, she said.
Two of Schwartz’s victims also testified Monday, including California-based accountant Ryan Schellhous, who invested $200K in the Atlanta Financial Center offering.
“When given a second chance to make amends … Mr. Schwartz has failed at every turn,” Schellhous said.
Grimberg said he didn’t factor in Schwartz’s refusal to leave the penthouse when considering the sentence, but he said his family’s continued residence there — on top of spending the CrowdStreet equity on personal expenses, including a $300K American Express bill — did call into question the completeness of his remorse.
“That is not someone who is trying to keep the lights on until the investment went through,” Grimberg said. “He still remains living in a luxury Manhattan penthouse … and his family still has no intent to move from that penthouse.”
