Weeks before news broke that Elie Schwartz misappropriated millions of dollars in investor funds, he asked an old friend for a small loan.
Schwartz asked Dr. Daniel Samadi for a short-term $1 million loan. Schwartz said he would pay it back in six months with 15 percent interest.
But Samadi was nervous. It was the second time Schwartz had asked for help; Samadi had already invested $1 million into a deal for Nightingale’s Atlanta Financial Center. That deal had raised $54 million from small-time investors and went into contract a year ago, but had yet to close. Questions swirled about why the deal had yet to close.
“If there’s anyway you would consider doing it I would appreciate it,” Schwartz said in a text message on June 9, 2023 to Samadi, according to court filings. “A lot of moving pieces on my end.”
Samadi suggested that Schwartz take his existing investment out of the Atlanta deal toward the loan. Ultimately, Samadi relented and handed Schwartz a $1 million check.
But Schwartz has not repaid him since, according to a new lawsuit. Samadi is now suing Schwartz in New York state court alleging Schwartz owes him $1 million plus interest.
Mitchell D. Haddad, the attorney representing Samadi, declined to comment. Schwartz did not respond to a request for comment.
Just a few weeks after Samadi extended his second loan, chaos struck Schwartz’s real estate portfolio. In July 2023, a trustee for investors alleged Schwartz misappropriated funds that were supposed to be used to close the Atlanta project and recapitalize a Miami Beach office project.
The trustee later alleged Schwartz spent $12 million of investor money betting on First Republic stock and options. The bank was seized by regulators in May 2023.
The news sent shockwaves throughout the industry. Scrutiny then turned to CrowdStreet, the online platform which Schwartz used to raise funds. The company did not require investors’ funds be held in an escrow account, allowing Schwartz to use the money for other purposes. CrowdStreet’s CEO resigned in late July.
Schwartz nevertheless managed to ink a settlement with CrowdStreet investors in October 2023. The agreement relied on Nightingale selling some of its assets. Schwartz also had to list his personal residences in New Jersey and Manhattan for sale.
At the end of 2023, Samadi’s wife Esther texted Schwartz asking about his plans to repay her husband’s loan.
“Unfortunately, I still haven’t put together the funds to repay the loan. Getting anything done has been a real struggle,” Schwartz texted back. “I am continuing to work on ways to free up cash and/or borrow funds to repay the loan.”
Esther said they needed at least a minor repayment. Her husband had invested $10 million with Schwartz, a significant part of his earnings over 15 years.
“My husband has invested 99 percent of his nest egg with you only to see it whittled down to 0.,” said Esther in text messages provided in court filings. “It’s very painful. He’s 53. He’s hoping to retire in peace. He’s heart broken, he feels defeated. Honestly, I hope he can survive this tremendous loss.”
She added, “If you have an ounce of rachmones [mercy] you will get the money back to my husband in the next week or two.”
In his text response, Schwartz denied that any of Sahadi’s money had been misappropriated.
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“If I had any money at all I would give it to you, and you wouldn’t have to ask. I have nothing,” said Schwartz. “With Hashem’s help, hopefully we will be successful in turning things around.”
Esther once again texted Schwartz, asking for her husband’s money back in early 2024. This time she forwarded a link of a Real Deal article about Schwartz making the first payment to CrowdStreet investors.
“Good morning Mrs. Samadi, I think this conversation would be more productive via phone or in person,” Schwartz replied. “There are many factors at play here, none of which the papers report. Getting your facts from the papers is not a good idea.”