Alleged Mark Nussbaum Fraud Victim Sues Flagstar Bank

A victim of an alleged escrow fraud scheme is now suing Flagstar Bank, saying it should have acted to stop the theft.

Elizabeth Capital Success had $148 million allegedly diverted from an attorney escrow account by former attorney Mark Nussbaum, who is facing state charges of grand larceny related to similar allegations.

Now, in a suit filed Monday in U.S. District Court for the Southern District of New York, the firm says Flagstar Bank, where Nussbaum deposited his funds, knew about the fraudulent activity. Flagstar employees flagged suspicious transactions from Nussbaum’s account, according to the complaint, but a key vice president at the bank would help him to conceal the illegal transfers.

“Without the active, substantial, and knowing assistance of Flagstar, Nussbaum’s fraudulent schemes would not have succeeded, and Elizabeth Capital would not have suffered a loss of [$148 million],” plaintiffs wrote in the complaint.

Nussbaum was an attorney with his firm Nussbaum Lowinger and his attorney escrow account at Flagstar was a key piece of his alleged fraudulent activity. Nussbaum moved billions through the Flagstar account.

Elizabeth Capital first began to send millions to Nussbaum’s account in 2023, under an agreement that the funds would be untouched in escrow. But unbeknownst to the firm, Nussbaum was loaning money from the account to real estate investor Mendel Steiner, and using the account for personal transactions.

Nussbaum would not only agree to hold the firm’s money in escrow in the account, but he and Steiner also allegedly presented Elizabeth Capital with fictitious joint ventures to invest in or fund, with the apparent goal of getting the firm to fund the account.

Elizabeth Capital’s principal asked Nussbaum to return the funds on Jan. 8, 2025. He allegedly did not do so, saying he was dealing with “an emergency.”

Steiner died by suicide the next day.

Now, Elizabeth Capital says the bank had been turning a blind eye.

In the years that Elizabeth Capital was investing with Nussbaum, Flagstar allegedly contacted the attorney 10 times about suspicious transactions.

In one of these communications, Nussbaum admitted in writing to commingling client funds in the escrow account and to misrepresenting the account balance to clients.

But in each case, bank vice president Timothy Collins would allegedly warn Nussbaum through calls and emails about the fraud inquiries directly before or after they went out. He would tell Nussbaum to say as little as possible about the transactions so that Collins could make the issue “go away,” according to the complaint.

A bank employee flagged that Nussbaum was using the account, a kind that is regulated by state law, to send money to his mother and to congregations, apparently personal uses that were improper for an attorney escrow account.

Flagstar, instead of shutting down the account, allegedly raised its credit limit three times.

Nussbaum maintained a relationship with Collins, referring additional business to him, treating his office to breakfast and gifting Collins “expensive wines,” according to the complaint. When Collins moved to Customers Bank, Nussbaum allegedly followed, opening an account there.

Collins also would have been aware of Nussbaum’s payments from the account to charities, school tuition accounts and entities blacklisted by Fannie Mae, along with payments that were immediately returned by their recipients.

After Collins’ departure, Flagstar finally did move to close Nussbaum’s accounts in November 2024, but let him make transactions until just before Christmas. In that time, Elizabeth Capital wired more than $50 million to Nussbaum’s account.

Flagstar declined to comment on litigation or clients.

Voice and text messages to Collins’ number were unreturned Thursday. Customers Bank said he is no longer employed with the company as of 2025.

An initial conference in the suit is scheduled for mid-December.

Nussbaum in May 2025 was charged with first-degree grand larceny by the Manhattan district attorney. He pleaded not guilty.

In April, The Real Deal reported Nussbaum allegedly had extensive pre-indictment plea talks with the U.S. Department of Justice and was facing imminent federal criminal charges, according to the lawyer overseeing his law firm’s winddown.

Former Nussbaum Lowinger clients, largely in the tristate area Orthodox Jewish community, are owed over $400 million from Nussbaum’s former law firms.

Another suit regarding Flagstar’s relationship to Nussbaum was filed earlier in the month in District Court in New Jersey. Nussbaum creditor Blueberry Funding made similar allegations about Flagstar’s apparent knowledge of the fraud, saying it was out more than $58 million from Nussbaum’s schemes.