Nightingale Properties, led by Elie Schwartz, raised more than $60 million from over 800 eager investors, on the crowdfunding platform CrowdStreet.
Nightingale claimed the money would fund purchases of the Atlanta Financial Center office complex and an eight-story Miami Beach office tower. But the deals never closed, leaving investors with a simple question: Where is the money?
They got their answer last week when their fiduciary, Anna Phillips, revealed that Nightingale, Schwartz and affiliated companies had “misappropriated” the funds. Only $125,000 remains in the bank account for the Atlanta deal, and the Miami Beach deal has a similarly paltry account.
Investors in the Atlanta deal were paid back up to $9 million. Another $8 million went to unidentified third parties. The rest of it went to Schwartz or his affiliated companies.
Schwartz and Nightingale have kept quiet since the revelation, but they aren’t the only entities under fire.
CrowdStreet has received much of the blame for releasing funds to Nightingale instead of safeguarding investors' funds in escrow until the deal closed, which is its policy. The crowdfunding firm said it released the funds after Nightingale agreed to only use them for the two projects.
“They literally have no idea what happened to all the money,” said Adam Stein-Sapir, a distressed debt expert.
Both parties have questions to answer. But, for Nightingale, it’s far from the firm’s only problem. It’s also facing foreclosure on two New York properties.
