Welcome to the fourth edition of our monthly newsletter, with all the real estate crowdfunding gossip and scuttlebutt that’s fit to print.
Synapse Bankruptcy Leaves Thousands Without Access to Savings
I’ve already written extensively about the terrible Synapse bankruptcy that impacted many Yieldstreet users. Recently, CBS News reported on the situation, which has also been affecting users of other fintech platforms. All of these platforms—Yotta, Juno, etc. — relied heavily on Synapse as their banking-as-a-service middleman.
Hugh Son of CBS News writes that “thousands” of Americans have been stuck in limbo and unable to access their savings for months after fintech startup Synapse filed for bankruptcy. Son’s article profiles a handful of the many individuals who lost access to their entire life savings with no clear timeline for recovery. One woman who put $280,000 in a Yotta account only received $500 from Evolve Bank & Trust, the lender and Synapse partner where her funds were supposed to be held. Another Yotta customer logged onto Evolve’s website on November 4 to find he was getting back just $128.68 of the $94,468.92 he had deposited, which led him to found a new advocacy organization called Fight For Our Funds.
There’s a small silver lining to this situation. In response to the Synapse catastrophe, the FDIC recently proposed a new rule to strengthen recordkeeping practices for deposits received from third parties.
Marc Andreessen Criticizes CFPB as "Terrorizing" Fintech
Venture capitalist Marc Andreessen made controversial comments about the Consumer Financial Protection Bureau (CFPB) on a recent podcast with Joe Rogan, claiming the agency "terrorizes" fintech and crypto companies to protect big banks. Andreessen argued the CFPB discourages innovation in financial services, though he failed to disclose how his own firm's fintech investments could benefit from lighter regulation. His comments deserve some fact-checking, which Jason Mikula was happy to provide. (It’s important to note that Andreessen’s venture capital firm, Andreessen Horowitz, has invested in Synapse.)
Mikula states that Andreessen incorrectly described the CFPB as Elizabeth Warren's "personal agency" that can "do whatever it wants,” when in fact Warren never led the agency and the Supreme Court ruled in 2020 that the president can replace the CFPB director at will. He wrongly claimed that the concept of "politically exposed persons" (PEPs) was created through recent banking reforms and applies to U.S. crypto founders and political opponents, when PEPs aren't actually defined in U.S. law and explicitly exclude U.S. public officials. He misrepresented Operation Choke Point as a response to marijuana and prostitution legalization, when it was actually a DOJ initiative focused on combating consumer fraud through payment processors. Additionally, he failed to disclose how his firm's portfolio companies, including Synapse, LendUp, and others, have engaged in questionable practices that would benefit from lighter regulation.
Nightingale Properties CEO Charged with Fraud
Elchonon “Elie” Schwartz, the CEO of Nightingale Properties (a CrowdStreet investment sponsor), used to be a rising star in East Coast commercial real estate. Schwartz, who once ran an IT consulting business, founded Nightingale in 2005 alongside Simon Singer and eventually built up a $10B track record. Now, his once-promising career is about to implode amid fraud allegations.
Schwartz is facing a single federal wire fraud charge. According to Assistant U.S. Attorney Christopher Huber, Schwartz raised $62.8M from accredited investors through CrowdStreet for investments in office buildings in Atlanta and Miami Beach, but instead "diverted the money to pay other investors and for personal use." The charge carries a maximum 20-year prison sentence. He was arraigned on December 4, 2024, at the U.S. District Court for the Northern District of Georgia in the Richard B. Russell Federal Building.
The specific wire fraud charge stems from a $30,000 wire transfer from a JPMorgan Chase account to a Bank of America account in California. According to the seven-page charging document unsealed after the hearing, this transfer was one of several payments for a Grönefeld 1941 Remontoire watch. The document also alleges that Schwartz transferred more than $12M to a brokerage account he controlled to fund stock and options trades in First Republic Bank and Credit Suisse during the banking crisis. Of the $6.9M in bank stock trades detailed by prosecutors, Schwartz lost all but about $400K within months. Prosecutors also claim he used $500K of investor funds to cover payroll expenses for his other commercial real estate businesses.
Beyond the specific charge, he is accused of misappropriating $54M of the $63M he raised across two 2022 CrowdStreet campaigns, one for the Atlanta Financial Center in Buckhead and another for the Lincoln Place office building in Miami Beach. Nearly 1,000 CrowdStreet investors had contributed a minimum of $25K each to these investment vehicles.
Schwartz pleaded not guilty but waived his right to a grand jury indictment, which potentially signals an upcoming plea deal. Indeed, as of December 19, he seemed poised to change his not-guilty plea to a guilty one in early 2025.
How did Nightingale originally rise to prominence? It’s a long story. The company began by acquiring retail and office properties in Sun Belt states, but soon set its sights on bigger opportunities. Between 2012 and 2017, Nightingale made a significant push into Philadelphia, investing nearly $900M in office buildings throughout the city's urban core. The company's profile rose further in 2019 through its partnership with Wafra Capital (now InterVest), when they flipped the Coca-Cola Building at 711 Fifth Ave for a $29M profit. Even as the pandemic emerged, Nightingale kept expanding aggressively, purchasing The Whale building in Brooklyn for $84M in 2020 and, with InterVest, acquiring 111 Wall St. and its land for a total of $395M, backed by a $500M debt package.
The company's trajectory changed dramatically with its entry into crowdfunding through CrowdStreet. In January 2022, Nightingale raised $25M for its purchase of 200 West Jackson in Chicago. Emboldened by this success, the company launched an even larger campaign in May 2022, raising a record-breaking $63M for the Atlanta Financial Center. A third deal followed in December 2022, raising $8.8M for 1601 Washington Ave in Miami Beach. However, by May 2023, troubling signs emerged when CrowdStreet discovered investor funds were missing. A subsequent investigation revealed that of the $71.8M raised, only $126K remained in the accounts.
This is what CrowdStreet has to say about Schwartz:
“From the moment we learned about this fraud, we have been unwavering in our commitment to transparency and justice. CrowdStreet uncovered the fraud and alerted federal authorities. To protect investors and uphold our principles, we provided substantial resources—millions of dollars—to initiate the appointment of an independent trustee to recover funds for victims. Additionally, we directly cooperated with and provided substantial support to federal authorities to build the case against those responsible.”
Distancing themselves from Schwartz may be an effective strategy for now, but you have to wonder why they partnered with him in the first place. Is it possible they could have seen this coming?
Bo Belmont Makes Lowball Offer on Sean “Diddy” Combs's Mansion
I’ve already written about Bo Belmont, the founder of the small crowdfunding platform Belwood Investments. The Wall Street Journal profiled him for buying Kanye West’s destroyed Malibu mansion earlier this year. In another unexpected deal with an infamous rap mogul, Belmont is attempting to purchase Sean "Diddy" Combs's Los Angeles mansion for $30 million, which is about half the asking price of $61.5 million. This offer comes as Combs was arrested in September for multiple federal charges, including racketeering conspiracy, sex trafficking, and transportation.
"I want to remove the stigma and focus on the charming elegance of this remarkable property," Belmont reportedly said.
Beverly Hills agent Rochelle Atlas Maize stated that Belmont’s lowball offer may also have to do with the fact that the luxury real estate market ($15-$60 million homes) in Los Angeles is not doing very well right now.
Belwood Investments was founded in Folsom, CA in 2018. The company later opened a Huntington Beach office in 2022, and recently moved to Newport Beach to accommodate its growth and real estate investment operations. Belwood is still a small player in the real estate crowdfunding world, but the Kanye West and Diddy news stories have undoubtedly raised its profile.
See You Next Month
Thanks for reading. Stay tuned for more gossip, slander, and scuttlebutt.