Nussbaum Lowinger escrow funds allegedly diverted to Steiner

When Mark Nussbaum’s law firm collapsed last year, it left clients scrambling to recoup missing escrow funds – and wondering where their money had gone.

A newly filed lawsuit now points to a dead Brooklyn real estate investor as the alleged linchpin of a sprawling scheme in which hundreds of millions of dollars were siphoned from client escrow accounts.

The lawsuit, filed by the lawyer handling the liquidation of Nussbaum’s former law firms, seeks to recover about $330 million from two entities formerly tied to the late Borough Park-based real estate investor Mendel Steiner. It alleges that Steiner ran a “ponzi scheme” through Nussbaum Lowinger’s escrow accounts to funnel client funds – a practice that the filings suggest led to the firm’s demise.

Nussbaum Lowinger abruptly shuttered in January. Months later, the Manhattan District Attorney’s Office charged Mark Nussbaum with grand larceny for stealing $15 million from client escrow funds. Nussbaum has pleaded not guilty.

The lawsuit alleges that Steiner lured Nussbaum Lowinger clients and prospective clients into two investment schemes which escrow funds were supposedly used to “show capital” for real estate deals, and another involving fabricated joint ventures tied to property acquisitions.

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 marshal assets from bona fide sources, including the Steiner estate, and he will continue to assist the assignee to the best of his ability to ensure maximum recovery for the creditors.”

Scheme 1: “Show capital”

Under the first alleged scheme, Steiner pitched Nussbaum Lowinger clients on what he described as a risk-free way to earn higher monthly returns.

Clients were told to deposit millions of dollars into the firm’s escrow accounts, where the money would remain untouched and be used only to “show capital” to potential property sellers as proof Steiner could close a deal.

But the lawsuit alleges that those promises were false.

Instead of sitting safely 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 purported “law firm client” for whom Steiner supposedly acted as an intermediary. In some cases, the lawsuit claims, that client didn’t exist, or the individual was not involved in the transaction.

Steiner would pay some of the higher returns early on 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 on property acquisitions.

Steiner provided Nussbaum Lowinger clients a description of the property he claimed to be buying and the name of the seller. Client money was supposed to fund deposits or acquisitions and remain in escrow until closing. Steiner allegedly promised investors a fixed return plus equity in the deal. He also allegedly told clients that he had an arrangement with the U.S. Department of Housing and Urban Development allowing him to purchase multifamily projects at auction.

The lawsuit alleges the deals were fabricated.

In some instances, the sellers did not own the properties. In others, no sales agreement existed at all. And Steiner never had an arrangement with HUD.

Instead, Steiner allegedly used the fake transactions as another way to convince clients to put money in the Nussbaum Lowinger escrow accounts, ultimately to be transferred to Steiner’s accounts, Real Green or Aven Realty.

“In order to induce the clients to make the investments, Mendel Steiner and MJN [Mark J. Nussbaum] prepared fraudulent contracts, emails and other documents containing fictitious names and other false information,” the lawsuit alleges.

Money transfers

The lawsuit sheds light on how much money was moving into Nussbaum’s accounts. Eight Nussbaum Lowinger clients wired a combined $380 million to the escrow account between 2022 and 2025.

But Steiner’s companies returned only $51.6 million to clients.

The lawsuit was filed as part of an alternative to bankruptcy process known as an assignment for the benefit of creditors. The lawyer handling the process, known as an assignee, is seeking to recover money to pay back creditors of Nussbaum Lowinger.

Steiner, who died by suicide in January in a Manhattan hotel, is the largest debtor to Nussbaum’s estate.

Nussbaum used his law firm as a pass-through to make bridge loans to real estate dealmakers, but many of those loans have not been paid back.

The lawsuit also does not provide any details about where Steiner transferred the funds after it went into his accounts. Steiner’s properties have faced foreclosures and requests for receivers to be appointed, further raising questions about the value of his estate.