When Mark Nussbaum’s regulation agency collapsed final yr, it left shoppers scrambling to recoup lacking escrow funds – and questioning the place their cash had gone.
A newly filed lawsuit now factors to a useless Brooklyn actual property investor because the alleged linchpin of a sprawling scheme wherein tons of of thousands and thousands of {dollars} had been siphoned from shopper escrow accounts.
The lawsuit, filed by the lawyer dealing with the liquidation of Nussbaum’s former regulation corporations, seeks to get better about $330 million from two entities previously tied to the late Borough Park-based actual property investor Mendel Steiner. It alleges that Steiner ran a “ponzi scheme” by way of Nussbaum Lowinger’s escrow accounts to funnel shopper funds – a apply that the filings recommend led to the agency’s demise.
Nussbaum Lowinger abruptly shuttered in January. Months later, the Manhattan District Lawyer’s Workplace charged Mark Nussbaum with grand larceny for stealing $15 million from shopper escrow funds. Nussbaum has pleaded not responsible.
The lawsuit alleges that Steiner lured Nussbaum Lowinger shoppers and potential shoppers into two funding schemes which escrow funds had been supposedly used to “present capital” for actual property offers, and one other involving fabricated joint ventures tied to property acquisitions.
Steiner’s property has not responded to the lawsuit and couldn’t be reached for remark.
In an announcement, Nussbaum’s legal professional mentioned “Mr. Nussbaum absolutely helps the assignee’s efforts to marshal belongings from bona fide sources, together with the Steiner property, and he’ll proceed to help the assignee to the perfect of his skill to make sure most restoration for the collectors.”
Scheme 1: “Present capital”
Below the primary alleged scheme, Steiner pitched Nussbaum Lowinger shoppers on what he described as a risk-free technique to earn increased month-to-month returns.
Shoppers had been informed to deposit thousands and thousands of {dollars} into the agency’s escrow accounts, the place the cash would stay untouched and be used solely to “present capital” to potential property sellers as proof Steiner might shut a deal.
However the lawsuit alleges that these guarantees had been false.
As a substitute of sitting safely in escrow, the funds had been transferred to Steiner-controlled entities, together with Actual Inexperienced Administration or Aven Realty.
To obscure Steiner’s function, Nussbaum additionally allegedly changed Steiner’s title in transaction paperwork with a purported “regulation agency shopper” for whom Steiner supposedly acted as an middleman. In some instances, the lawsuit claims, that shopper didn’t exist, or the person was not concerned within the transaction.
Steiner would pay a few of the increased returns early on to construct investor confidence, the lawsuit alleges.
Scheme 2: Phantom joint ventures
In a second scheme, Steiner allegedly satisfied shoppers to spend money on joint ventures on property acquisitions.
Steiner offered Nussbaum Lowinger shoppers an outline of the property he claimed to be shopping for and the title of the vendor. Consumer cash was speculated to fund deposits or acquisitions and stay in escrow till closing. Steiner allegedly promised traders a hard and fast return plus fairness within the deal. He additionally allegedly informed shoppers that he had an association with the U.S. Division of Housing and City Growth permitting him to buy multifamily tasks at public sale.
The lawsuit alleges the offers had been fabricated.
In some situations, the sellers didn’t personal the properties. In others, no gross sales settlement existed in any respect. And Steiner by no means had an association with HUD.
As a substitute, Steiner allegedly used the pretend transactions as one other technique to persuade shoppers to place cash within the Nussbaum Lowinger escrow accounts, in the end to be transferred to Steiner’s accounts, Actual Inexperienced or Aven Realty.
“In an effort to induce the shoppers to make the investments, Mendel Steiner and MJN [Mark J. Nussbaum] ready fraudulent contracts, emails and different paperwork containing fictitious names and different false info,” the lawsuit alleges.
Cash transfers
The lawsuit sheds gentle on how a lot cash was transferring into Nussbaum’s accounts. Eight Nussbaum Lowinger shoppers wired a mixed $380 million to the escrow account between 2022 and 2025.
However Steiner’s corporations returned solely $51.6 million to shoppers.
The lawsuit was filed as a part of an alternative choice to chapter course of referred to as an project for the good thing about collectors. The lawyer dealing with the method, referred to as an assignee, is looking for to get better cash to pay again collectors of Nussbaum Lowinger.
Steiner, who died by suicide in January in a Manhattan lodge, is the most important debtor to Nussbaum’s property.
Nussbaum used his regulation agency as a pass-through to make bridge loans to actual property dealmakers, however a lot of these loans haven’t been paid again.
The lawsuit additionally doesn’t present any particulars about the place Steiner transferred the funds after it went into his accounts. Steiner’s properties have confronted foreclosures and requests for receivers to be appointed, additional elevating questions in regards to the worth of his property.
Learn extra
Mark Nussbaum names names in new filings
Fannie Mae secures receiver for Mendel Steiner’s properties
How Mark Nussbaum went from transactional lawyer to escrow-funded dealmaker
