Nightingale Properties’ Elie Schwartz missed his first payment to investors as part of a sweeping settlement agreement over money diverted from two office deals.
Schwartz was supposed to pay $3 million by the end of December, but he has yet to fork over a dime, according to a letter to investors obtained by The Real Deal.
Schwartz has a 10-day grace period to make the payment or else he will be in default. A trustee for the investors said Schwartz has said he intends to “remit some funds” to investors.
The missed payment is the latest turn in a saga between Elie Schwartz and hundreds of investors who put tens of millions of dollars into Nightingale office deals in Atlanta and Miami Beach through the crowdfunding platform CrowdStreet.
An independent trustee told investors on a webinar last summer that most of their money had been misappropriated. Schwartz used about $12 million of it for a disastrous bet on First Republic stock and options prior to the bank being seized by regulators. Schwartz also spent some on watches and credit card payments, according to a forensic accountant.
CrowdStreet came under scrutiny as well for failing to escrow the investors’ funds.
In October, Schwartz and the trustee, Anna Phillips, reached a settlement calling for Schwartz to pay investors $3 million by the end of December, followed by quarterly payments. It relied on him selling personal assets, including his penthouse at One West End in Manhattan and an 11-bedroom French chateau in Englewood, New Jersey.
Schwartz was also expected to pay investors with proceeds from the sale of the Miami Beach property at 1601 Washington Avenue, to which Schwartz had allegedly diverted money.
Most of CrowdStreet’s investors approved the plan. In December, the trustee and Schwartz finalized the settlement in bankruptcy court.
But for unknown reasons, Schwartz has failed to make a payment. If Schwartz does not cough up the full amount, the trustee will draw down on $300,000 of funding from CrowdStreet on Jan. 31, according to the letter.
Schwartz did not return a request for comment. An attorney for the trustee also did not return a request for comment.
Since the scandal, many of Nightingale’s assets have faced or been lost to foreclosure, including the Whale Building in Brooklyn and 111 Wall Street in Manhattan.
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