Tore Steen is out as the CEO of the crowdfunding platform CrowdStreet after tens of millions of dollars allegedly went missing from accounts connected to Nightingale Properties, according to a source familiar with the situation.
Steen will be replaced by Jack Chandler, the former chair of BlackRock’s global real estate arm and a member of CrowdStreet’s board of advisors.
Steen co-founded CrowdStreet with Darren Powderly about a decade ago and led the company to become one of real estate’s largest crowdfunding platforms. It closed a $43 million funding round in October and boasted about a 17.5 percent internal rate of return for investors.
“What we’ve changed is to have brought the old syndication model of raising capital through institutions, ultra-high-net-worth individuals and family office money … into the online paradigm,” Steen told Commercial Observer last year.
But CrowdStreet has come under intense scrutiny since a fiduciary told investors two weeks ago that millions of dollars raised through the platform for two Nightingale office projects in Miami Beach and Atlanta were missing. The fiduciary, Anna Phillips, said about $60 million from more than 800 investors had been “misappropriated.”
Neither deal ever closed. Phillips said she found most of the money had gone to Nightingale’s CEO Elie Schwartz, entities affiliated with Schwartz, or unidentified third parties.
CrowdStreet executives blamed Nightingale, but questions were immediately raised about how the platform allowed investors’ money to be diverted.
CrowdStreet is looking to appoint an independent manager to take control of an investor entity that raised $25 million last year for a Nightingale project in Chicago, according to Bisnow. That deal did close, but CrowdStreet told investors that it has not received audited financial statements of the building from Nightingale.
In a recent interview with TRD, Steen emphasized that CrowdStreet is a “marketplace platform” and does not take custody of investment funds. It was not required to put the funds into escrow.
Steen said he had no reason to believe that Nightingale would not follow the terms of its agreement.
“Why would someone not follow that?” said Steen. “If someone doesn’t follow that and misappropriated [the funds], they could be facing jail time. And does that not concern somebody?”
CrowdStreet and Steen did not return a request to comment on his departure.