The other partner in the now dissolved Nussbaum Lowinger is airing his side of the story.
Mark Nussbaum shut down his Manhattan-based law firm in January after clients started demanding millions of dollars intended to be held in escrow. In May, the Manhattan District Attorney’s office charged Nussbaum with grand larceny for allegedly stealing $15 million in escrow funds.
Nussbaum has pleaded not guilty. He recently started an alternative to bankruptcy in an attempt to collect on outstanding loans to pay back former clients.
But until recently, the minority partner in Nussbaum Lowinger has remained quiet.
Lowinger, a young attorney and talented saxophone player, said in a recent filing in a lawsuit in New York Supreme Court that he was kept in the dark about Nussbaum’s problems with clients until shortly before the firm’s closure.
Lowinger provided a brief account of the firm’s final days in an affirmation filed as part of a lawsuit filed by Cashable, a hard money lender who sued the law firm along with the two partners individually. Cashable, led by Lazer Preizler, is seeking to recover $1.26 million of escrow money.
Lowinger said he started getting demands from clients and other parties about funds held in the firm’s escrow account just prior to the firm’s collapse. He claimed that Nussbaum controlled all the Nussbaum Lowinger escrow accounts. Nussbaum was the only one with online access and viewing privileges.
On Jan. 9, Lowinger informed Customers Bank, the bank that allegedly held the escrow accounts, about his concerns. Lowinger said there were illicit withdrawals from the escrow account and he sought to have Nussbaum removed as a signatory on the account.
But Customers Bank allegedly told Lowinger he had no ability to remove Nussbaum as a signatory. The bank made the decision to freeze its account with Nussbaum Lowinger, according to Lowinger’s affirmation.
On January 14, Lowinger sent off an email to Cashable and other clients letting them know that the escrow account had been “improperly depleted.” Lowinger claims he did this to protect Nussbaum Lowinger clients.
A day later, Nussbaum dissolved Nussbaum Lowinger. He did so without seeking any input from his minority partner, according to Lowinger. Nussbaum then appointed Ethan Kobre as the lawyer to handle legal matters during the wind-down process, something Lowinger claims he also had no input on.
On July 10, Cashable discontinued its claims against Lowinger. It is still pursuing Nussbaum over the unpaid debt.
Nussbaum’s attorney did not immediately return a request to comment. Lowinger’s attorney also did not return a request for comment.
Nussbaum filed an assignment for the benefit of creditors in June. The process is an alternative to bankruptcy in which an attorney appointed by Nussbaum will seek to pursue loans made by him to repay his creditors. Nussbaum reportedly has tens of millions of dollars of money owed to him.
Nussbaum essentially operated as a hard-money lender. He engaged in a practice called “show funds,” where he provided short-term loans to real estate dealmakers who needed quick money to close deals. The funds “showed” that the dealmaker was capitalized.
When the deal was finalized, the money would flow back through Nussbaum’s account. Nussbaum would get a fee, and so would other investors and clients of Nussbaum’s who provided the initial funds for the loans.
But Nussbaum eventually started running into a deficit and clients, such as Cashable, demanded their money back. It’s possible those clients could collect through the ABC, but such a repayment is unlikely to be at the full value of their investment.
Read more
Mark Nussbaum begins bankruptcy alternative to pay off escrow clients
Manhattan DA charges dealmaker Mark Nussbaum with grand larceny
Mark Nussbaum shuts down law firm
