Elchonon “Elie” Schwartz, a Hasidic real estate developer from New York, was sentenced to more than seven years in federal prison for orchestrating a wire fraud scheme that defrauded more than 800 investors out of $62.8 million, federal prosecutors said Tuesday.
Schwartz, 46, was sentenced to 87 months in prison by a federal judge in the Northern District of Georgia and ordered to pay over $45 million in restitution. He pleaded guilty in February to wire fraud in connection with a scheme that involved raising millions through the real estate crowdfunding platform CrowdStreet.
According to the U.S. Department of Justice, between May and November 2022, Schwartz solicited funds from investors for two major commercial real estate projects: a $54 million acquisition of the Atlanta Financial Center in Buckhead, Georgia, and an $8.8 million recapitalization of a mixed-use property in Miami Beach, Florida. At the time, Schwartz was CEO of Nightingale Properties and claimed to have a $10 billion track record.
CrowdStreet promoted Schwartz as a top-tier sponsor and marketed the deals to retail investors. Schwartz told investors their money would be held in segregated escrow accounts and used solely for the real estate transactions.
Instead, prosecutors said, nearly all of the funds were diverted to Schwartz’s personal bank and brokerage accounts. He used the money to buy luxury items, including a Grönefeld 1941 Remontoire watch worth about $120,000, invest in volatile stock options, and cover payroll costs at other struggling properties.
Neither the Atlanta nor the Miami deal was ever completed. By mid-2023, both Nightingale subsidiaries involved had filed for Chapter 11 bankruptcy. A trustee appointed by CrowdStreet has been working to recover the stolen funds, though less than 20% has been returned so far.
"Schwartz’s greed was boundless," U.S. Attorney Theodore Hertzberg said in a statement. The FBI called the case a "callous abuse of investor trust" and vowed continued efforts to combat white-collar crime.
Victims of the fraud include doctors, nurses, retirees, and small business owners, many of whom invested between $25,000 and $250,000. Some reported losing retirement savings or postponing children’s education plans. Chicago businessman Craig Leva, who lost money in the scheme, criticized the sentence as too lenient. “It feels like he’s too wealthy and too connected. He’ll walk away and do it again,” Leva said.
Prosecutors had recommended a sentence of 78 to 97 months, citing Schwartz’s lack of criminal history and his cooperation with authorities. His defense argued for probation, saying he buckled under the pressure of the post-pandemic real estate crash.
In a letter to the court, Schwartz described himself as remorseful and claimed he made desperate decisions under financial stress. He now works as a consultant rather than handling investor funds directly and has engaged with the Aleph Institute, a Jewish nonprofit supporting incarcerated individuals.
However, his efforts to make amends were undermined by his refusal to vacate a Manhattan penthouse he bought for $18 million in 2018. Although he had agreed to sell the apartment as part of a restitution settlement, Schwartz, his wife, and children continued to live there, prompting the bankruptcy trustee to sue for eviction. A judge has ordered them to vacate by May 21 or face a $10,000 daily contempt fine.
Schwartz also defaulted on a repayment agreement after making only one $3 million payment. Federal officials said restitution could take years due to the complexity of his remaining assets. The Securities and Exchange Commission has filed a separate civil suit accusing him of securities fraud, including a $6.4 million stock purchase, federal officials called a "reckless attempt" to recover investor funds.
The case has raised concerns about oversight on real estate crowdfunding platforms. CrowdStreet, once seen as a leader in democratizing real estate investment, has come under scrutiny for its due diligence practices. Some investors said they were misled about how their funds would be protected.
“I’m okay losing money in a deal — that’s a risk I understand,” said Atlanta investor Andrew Doyle, who lost more than $70,000. “But this wasn’t a deal gone bad. This was outright fraud.”
