The New York real estate CEO who led the failed crowdfunded effort to buy Buckhead’s Atlanta Financial Center was sentenced late Monday to more than seven years in federal prison, bringing an end to an investment fraud scheme that began more than three years ago.
Elie Schwartz, 46, received the 87-month sentence after three hours of arguments from his counsel and federal prosecutors, as well as statements from two jilted investors, the fiduciary in charge of recouping the lost investments, as well as a statement in his defense from his wife. He will also receive three years of supervised probation after his release from prison and must pay about $45.8 million in restitution to the investors.
Schwartz, the CEO of Nightingale Properties, pleaded guilty in February to a single count of wire fraud. He admitted to misusing investor funds raised to try to acquire Buckhead’s Atlanta Financial Center and another commercial property in Miami.
More than 10 of Schwartz’s family members, friends and other associates sat in the courtroom during Monday’s hearing, a number of whom gasped after U.S. District Judge Steven Grimberg delivered the sentence.
Grimberg said it’s important to show that offenses like the one Schwartz committed deserve consequences. Schwartz wasn’t using the investor funds to stay afloat, Grimberg said — he was using it to live well beyond his means.
“To use the parlance of investors, we need to flip the ROI,” Grimberg said in his closing remarks. “Otherwise, rational people make the decision that it is worth the risk if the consequences are modest.”
Schwartz admitted to using investor funds to buy luxury watches, invest in stock and options in troubled banks First Republic and Credit Suisse and other personal and business expenses. By pleading guilty, he avoided a trial.
Between May 2022 and early 2023, Schwartz’s company, Nightingale Properties, raised more than $62 million on a real estate crowdfunding website to acquire and renovate the Buckhead office complex and another commercial property in Miami. For the Atlanta Financial Center deal, Nightingale raised about $54 million from more than 600 backers, all of whom invested a minimum of $25,000, according to a charging document.
Schwartz transferred a majority of the money raised into his personal bank account, brokerage account and other accounts under his control, according to a charging document. A portion of those funds was sent to a luxury watch dealer to pay a $30,000 installment on a Gronefeld 1941 Remontoire watch, which can sell for more than $100,000. Additionally, Schwartz used the funds for payroll expenses for his other commercial real estate businesses, a luxury condo in Miami and credit card debt.
Small business owner and certified public accountant Ryan Schellhous was one of the investors who spoke during the hearing. He said he lost $200,000. That’s money that could’ve been spent on paying his children’s college tuition, hiring another employee at his small business or achieving his dream of homeownership, he said.
In a defense sentencing memo filed ahead of the hearing, Schwartz’s lawyer, Colin Garrett, said he has pivoted to a new career as a consultant in high-level real estate acquisitions. With this new role, Schwartz said he is making sure “not to put myself in a position to hold other people’s money,” according to an excerpt pulled from a letter he wrote to Grimberg.
“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,” Schwartz wrote in the letter, which was filed under seal, though excerpted in the memo. “In a way, I am protecting myself from myself. I did this not because I think I would have a lapse in judgement [sic] again, but because I don’t even want to be in the position to have the option to do so.”
In the memo, Garrett argued Schwartz’s criminal conduct was a stark departure from 30 years of “ethical business dealings.” Before the Atlanta and Miami deals, he never failed to close a real estate deal, his lawyer said. But the prosecution argued Schwartz’s plan involved a course of conduct to raise money from investors on the pretense that their investments would be kept safe.
Schwartz had the final word before his sentencing, during which he compared the past three years of his life to the “run, Forrest, run!” scene in “Forrest Gump,” comparing the titular character’s leg braces to the “dark cloud” that has hovered over him. He said he believed he would be able to run just like Forrest — solving his problems and making the investors whole without distraction — if his leg braces were removed.
It was an odd comparison. In the 1994 Robert Zemeckis film, Gump was an innocent child who wore the braces to correct a spinal condition. While being chased by bullies on bicycles, the braces broke, setting him free.
Schwartz was not taken into custody after the hearing but will be ordered to report to prison in the months ahead.
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