Not Your Money

A New York Real Estate mogul learns a valuable lesson about other people's money

“When all else fails, there’s always delusion.” – Conan O’Brien

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Investors’ money is not your money. For some people in business, this is one of the hardest lessons to learn.

Elie Schwartz, 46, is learning the hard way. On Tuesday, a federal judge slapped the New York real estate mogul with an 87-month prison sentence for a $62.8 million scheme involving commercial properties in Atlanta and Miami.

The CEO of Nightingale Properties raised tens of millions of dollars from investors on CrowdStreet Marketplace, a crowdfunding site that lets small-time investors into commercial real estate deals.

Schwartz was supposed to use the money to buy the Atlanta Financial Center and a mixed-use development in Miami Beach, and he was required to keep the money in segregated escrow accounts.

Instead, he put it in his own accounts and spent it on just about anything anything he wanted, including a $7 million condo in Miami and a $120,000 Grönefeld 1941 Remontoire watch.

Elie Schwartz crowdfunded his way to a life of luxury. (Illustration credits: LinkedIn, Al Lewis, ChatGPT)

There was no trial. Schwartz pleaded guilty to one count of wire fraud in February. He was also sued by the Securities and Exchange Commission.

Take this as handy little business tip: If you think investors’ money is your money, you may soon find yourself doing time, and when you’re doing time, you don’t need a $120,000 watch.

Schwartz is learning, though – at least according to BisNow, which has done thorough reporting on his blunder.

Here’s what Schwartz said in a letter to the judge before his sentencing:

“I am making sure not to put myself in a position to hold other people’s money. I learned a valuable lesson about my vulnerability in controlling money under extreme circumstances, and now I am ensuring that no matter how much pressure I am under, I won’t have access to any funds … In a way, I am protecting myself from myself.”

It took federal investigators to get Schwarz to protect himself from himself. Then it took a judge to make him realize that his $19 million New York penthouse was no longer his penthouse. When a bankruptcy judge ordered him to put it up for sale, he listed the property, but he refused to move out until ordered to do that, too.

“Taking an old man’s retirement money while you’re living in a multimillion-dollar penthouse in Manhattan doesn't seem to be fair or right,” John Lee, 69, of Harrisburg, Penn., who invested $45,000, told Bisnow.

Lee was among more than 800 people who invested at least $25,000 each in Nightingale through CrowdStreet. To invest, they had to attest that they were “qualified investors” with a minimum net worth of $1 million and annual income of $200,000.

If they couldn’t suffer the losses, they shouldn’t have invested – so there are blunders everywhere in this deal.

Schwartz at least had a track record, having reportedly amassed a $10 billion real estate portfolio. This gave his investors confidence, but it also gave him overconfidence.

“His boundless belief in his own abilities, seemingly justified by his record of success, caused him to take outsized risks,” Schwartz’ public defender Colin Garrett wrote in a pre-sentencing memo. “He was almost too comfortable with high-pressure, high-risk investment ventures.”

And too comfortable with a $19 million penthouse, a $7 million condo and a $120,000 watch.

“Schwartz’s greed was boundless,” said U.S. Attorney Theodore Hertzberg for the Northern District of Georgia. “He callously abused the trust of hundreds of investors to line his own bank accounts, purchase expensive watches, and buy additional luxury items.”

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