A man has admitted scamming more than 800 investors in a $63 million real estate fraud.
Elchonon “Elie” Schwartz, 46, from New York City, pleaded guilty to one count of wire fraud for his involvement in a multi-million-dollar investment scheme.
Schwartz deceived investors who used the crowdfunding platform CrowdStreet to invest in two commercial real estate properties.
The Scheme Unfolded
Between May 2022 and November 2022, Schwartz raised nearly $63 million from 821 investors. His plan involved soliciting investments in two high-profile commercial real estate projects:
- Atlanta Property: Schwartz raised about $54 million for a large commercial complex in Atlanta.
- Miami Beach Property: Another $8.8 million was raised for a mixed-use development in Miami Beach, Florida.
Both campaigns used the CrowdStreet platform, a popular site for real estate crowdfunding.
Schwartz promised investors their funds would be used exclusively for the properties they were investing in.
He further assured them that their money would be securely held in segregated accounts, preventing any misuse or commingling of funds.
The Deception
Schwartz’s representations turned out to be false. Instead of using the investor funds as promised, he diverted most of the money for his personal benefit. He transferred the funds to his:
- Personal Bank Accounts: Funds were funneled into Schwartz’s own accounts, including personal brokerage accounts.
- Unrelated Real Estate Ventures: Schwartz also used the money for his other commercial real estate projects.
- Personal Expenses: The funds were used to buy luxury items like watches and to pay for payroll expenses unrelated to the investor properties.
By mid-July 2023, both corporate entities Schwartz formed to manage the investments filed for Chapter 11 bankruptcy, marking the end of his fraudulent activities.
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Legal Consequences
Schwartz now faces significant legal repercussions.
He pleaded guilty to wire fraud, a federal crime that could result in up to 20 years in prison.
His sentencing is scheduled for May 19, and a judge will determine the final penalty, considering factors outlined by the US Sentencing Guidelines.
IThe investigation was conducted by the FBI’s Atlanta Field Office, with assistance from the U.S. Securities and Exchange Commission (SEC). The prosecution is led by Trial Attorney Matthew F. Sullivan of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Kelly Connors.
Key Takeaways
- Investor Betrayal: Schwartz raised millions from investors on CrowdStreet but misused the funds for personal gain.
- Legal Action: After pleading guilty to wire fraud, Schwartz faces a maximum sentence of 20 years in prison.
- FBI and SEC Involvement: The case was investigated by the FBI, with additional help from the SEC.
Schwartz’s actions serve as a cautionary tale for those investing in crowdfunding platforms, highlighting the potential risks of mismanagement and fraud in the real estate market.
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Looking Ahead
As sentencing approaches, the case remains a stark reminder of the need for vigilance when investing through online platforms.
Investors should always ensure transparency and accountability before committing their funds to any project.
