A newly filed lawsuit now points to a dead Brooklyn real estate investor as the alleged kingpin of a massive scheme that siphoned hundreds of millions of dollars from client escrow accounts.
The lawsuit, filed by the attorney handling the liquidation of Nussbaum’s former law firms, seeks to recover approximately $330 million from two entities formerly associated with the late Borough Park real estate investor Mendel Steiner. It is alleged that Steiner carried out a “Ponzi scheme” through Nussbaum Lowinger’s escrow accounts to siphon off client money – a practice that led to the company’s demise, according to the documents.
Nussbaum Lowinger closed its doors abruptly in January. Months later, the Manhattan district attorney charged Mark Nussbaum with grand larceny for stealing $15 million from clients’ escrow funds. Nussbaum has pleaded not guilty.
The lawsuit alleges that Steiner lured customers and potential customers of Nussbaum Lowinger into two investment schemes that allegedly used escrow funds to “demonstrate capital” for real estate transactions, and another that involved fabricated joint ventures in real estate purchases.
Steiner’s estate has not responded to the lawsuit and could not be reached for comment.
In a statement, Nussbaum’s attorney said: “Mr. Nussbaum fully supports the assignee’s efforts to raise assets from bona fide sources, including Steiner’s estate, and he will continue to assist the assignee to the best of his ability to ensure maximum recovery for creditors.”
Schedule 1: “Show capital”
As part of the first alleged scheme, Steiner pitched Nussbaum Lowinger clients on what he described as a risk-free way to earn higher monthly returns.
Customers were told to deposit millions of dollars into the company’s escrow accounts, where the money would remain untouched and used only to “demonstrate capital” to potential real estate sellers as proof that Steiner could close a deal.
But the lawsuit claims those promises were false.
Instead of being safely held in escrow, the funds were transferred to Steiner-controlled entities, including Real Green Management or Aven Realty.
To obscure Steiner’s role, Nussbaum also allegedly replaced Steiner’s name in transaction documents with a so-called “law firm client” for whom Steiner would allegedly act as an intermediary. In some cases, the lawsuit alleges, that client did not exist, or the individual was not involved in the transaction.
Steiner would pay some of the higher returns early to build investor confidence, the lawsuit alleges.
Scheme 2: Phantom joint ventures
In a second scheme, Steiner allegedly convinced clients to invest in joint ventures for the purchase of real estate.
Steiner provided Nussbaum Lowinger’s clients with a description of the property he claimed to be purchasing and the name of the seller. Customer money was to finance deposits or acquisitions and remain in escrow until closing. Steiner is said to have promised investors a fixed return plus equity in the deal. He also allegedly told clients that he had an agreement with the U.S. Department of Housing and Urban Development that allowed him to buy multifamily projects at auction.
The lawsuit claims the deals were fabricated.
In some cases, the sellers did not own the properties. In other cases, there was no sales agreement at all. And Steiner never had an appointment with HUD.
Instead, Steiner allegedly used the bogus transactions as another way to convince customers to put money into Nussbaum Lowinger’s escrow accounts, ultimately to be transferred to Steiner’s, Real Green or Aven Realty’s accounts.
“To encourage customers to make the investments, Mendel Steiner and MJN [Mark J. Nussbaum] created fraudulent contracts, emails, and other documents that contained fictitious names and other false information,” the lawsuit alleges.
Money transfers
The lawsuit sheds light on how much money ended up in Nussbaum’s accounts. Eight Nussbaum Lowinger clients transferred a combined $380 million to the escrow account between 2022 and 2025.
But Steiner’s companies returned only $51.6 million to customers.
The lawsuit was filed as part of an alternative to a bankruptcy process known as an assignment for the benefit of creditors. The lawyer handling the lawsuit, known as an assignee, is trying to recover money to repay Nussbaum Lowinger’s creditors.
Steiner, who committed suicide in a Manhattan hotel in January, is the largest debtor to Nussbaum’s estate.
Nussbaum used his law firm as a conduit to make bridge loans to real estate dealers, but many of those loans have not been repaid.
The lawsuit also provides no details about where Steiner transferred the money after it ended up in his accounts. Steiner’s properties have suffered bankruptcies and requests to appoint trustees, raising further questions about the value of his estate.
Read more
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How Mark Nussbaum went from transactional lawyer to escrow-financed dealmaker
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