Hundreds invested $63m in real estate deals, but where’s the cash?
Hundreds of regular investors who together put up $63 million to buy pieces of Atlanta and Miami commercial real estate have allegedly seen their funds disappear.
Two deals orchestrated by CrowdStreet Inc., a real estate investment company that crowd-sources funds from relatively wealthy individuals, have fallen apart as investors’ money vanished from bank accounts earmarked to buy equity in buildings, according to bankruptcy court papers.
An independent manager brought in to look at how the deals went sour found millions of dollars of the crowdfunded cash ended up in accounts owned by Nightingale Properties, a firm CrowdStreet partnered with on the transactions, along with Nightingale’s chief executive officer, court papers show.
“When we became suspicious of potential financial misconduct, we alerted regulators and negotiated for the appointment of an independent manager,” a representative for CrowdStreet said in an emailed statement Monday. “Financial fraud is a risk we take seriously, and we remain committed to providing investors with the best online real estate investing experience.”
Nightingale, based in New York, and Chief Executive Officer Elie Schwartz did not respond to requests for comment.
In order to investigate the accounts — and potentially recover funds — the independent manager put the two legal entities earmarked to buy equity in the Atlanta and Miami buildings in bankruptcy last Friday. Bankruptcy will allow the companies to come up with a repayment plan for creditors.
An attorney for Schwartz has said he will cooperate with the investigation, according to court papers.
Nightingale raised funds from accredited investors through CrowdStreet’s online platform. The money was then placed in two shell
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