U.S. Securities and Exchange Commission Litigation Release No. 26254, dated February 21, 2025.
The SEC charged Elchonon Schwartz and his firm, Nightingale Properties, LLC, with defrauding over 700 investors out of more than $52 million. They allegedly used an online platform to raise funds for specific real estate deals but instead misused the money for other failing projects, personal purchases like watches and a penthouse, and unprofitable trading.
In Plain English
Imagine you give money to a friend to invest in a specific lemonade stand they promise to build. They tell you the money will only be used for that lemonade stand. But instead, they take your money and use it to fix their old, broken-down ice cream truck, buy fancy watches, and gamble on stocks. That's what happened here, but with real estate deals and a lot more money involved.
Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.
How the Alleged Scheme Worked
- Raise Funds for Specific Deals Elchonon Schwartz, through his firm Nightingale Properties, LLC, offered investors opportunities to fund two commercial real estate projects: the Atlanta Financial Center Offering and the Miami Beach Offering. They raised approximately $54 million for the Atlanta deal and $8.8 million for the Miami deal, totaling over $60 million from at least 700 investors nationwide.
- Promise Proper Use of Funds Schwartz and Nightingale assured investors that the money raised would be placed in segregated bank accounts and used exclusively for the benefit of the specific real estate deals they invested in. They also promised that funds would not be moved until the deals were closed.
- Misappropriate Atlanta Funds Contrary to these promises, Schwartz allegedly misappropriated at least $42 million from the $54 million raised for the Atlanta Financial Center Offering. This included using over $5 million to repay unrelated borrowings, transferring over $12 million to brokerage accounts to purchase First Republic Bank shares, and transferring over $16 million to personal accounts.
- Use Atlanta Funds for Personal Gain Of the $16 million transferred to personal accounts from the Atlanta offering, Schwartz allegedly used more than $7 million to pay for a luxury condo he was building in Miami.
- Misappropriate Miami Funds Schwartz also allegedly misappropriated virtually all of the $8.8 million raised in the Miami Beach Offering. These funds were used to prop up other failing business ventures managed by Schwartz.
- Further Commingle Funds In a further commingling of funds, Schwartz transferred over $4 million of the misappropriated Miami Beach funds back into the Atlanta Financial Center accounts, obscuring the flow of money.
- Leave Investors with Losses While some investors in the Atlanta offering received partial refunds, the scheme resulted in outstanding losses of $43.7 million for the Atlanta deal and $8.8 million for the Miami deal, totaling over $52 million in investor losses.
The Enforcement Action
The SEC announced charges against Elchonon Schwartz and Nightingale Properties, LLC for defrauding at least 700 investors of more than $52 million. The SEC's complaint, filed in the U.S. District Court for the Northern District of Georgia, charges violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, seeking injunctions, disgorgement, and civil money penalties. In a parallel action, the U.S. Attorney’s Office for the Northern District of Georgia and the Fraud Section of the U.S. Department of Justice filed a criminal information charging Schwartz with wire fraud in December 2024, which is pending.