Crowdstreet's $63M Nightmare: Real Estate Investments Drained, Entities Bankrupted

Two investment deals put together by Crowdstreet Inc. and worth $63 million have vanished. Hundreds of investors raised the money to buy Atlanta and Miami commercial real estate (CRE).

Crowdstreet, a real estate investment company that crowdsources funds, experienced a loss in two Nightingale Properties deals with funds raised by more than 800 investors. According to the fiduciary, the deals never finalized and funds were purportedly misused by entities associated with Elie Schwartz, the CEO of Nightingale.

CrowdStreet admitted that instead of sitting in escrow, the funds went to separate accounts managed by Nightingale and Schwartz. The company was bound by an operating agreement that stipulated the funds would exclusively be allocated to the two projects in Miami and Atlanta

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CrowdStreet says it employs a rigorous vetting process, including background checks. Crowdstreet CEO Tore Steen told RealDeal, “We have never experienced anything like this, and said his company is a 'marketplace platform' and does not take custody of investment funds.”

CrowdStreet had raised the funds through its online platform and placed the money into two shell companies. Nightingale was expected to use the money to buy an Atlanta office complex in the Buckhead neighborhood and a mixed-use property in Miami Beach.

According to Bloomberg, Anna Phillips, the recently designated independent manager for the concerned entities, initiated an internal investigation to locate the missing funds. She found that the bank accounts of these entities had been completely depleted.

Phillips found only $125,000 and $1,600 remaining in the two accounts, according to court papers. She has put both legal entities in bankruptcy, hoping it will give the companies time to develop a repayment plan for creditors.

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