Editor's note: This story has been updated to reflect that a criminal investigation has been initiated against Craig Sherman.

With millions of dollars of a client's money missing and a civil fraud claim lined up against him, it's been an unceremonious end to Craig Sherman's tenure as the attorney for Bay Harbor Islands.

Sherman worked for more than 40 years as the municipal lawyer for the island town tucked between Biscayne Bay and Bal Harbour. Earlier this month, he surrendered his law license amid allegations he fleeced his client Barry Smith in a real-estate development scam.

During a meeting at Sherman's Boca Raton law office this past October 23, Sherman allegedly admitted to Smith he had "screwed" him out of his investment money, according to court documents. He purportedly proposed a $10,000-a-month repayment plan, which was somewhat problematic. At that rate, Sherman would be nearly 110 years old by the time Smith received all of his money.

In a new lawsuit filed against Sherman, Smith is demanding $4.17 million in damages. He says he entrusted $4.9 million to Sherman over the years, only $780,000 of which has been repaid in principal. The lawsuit does not specify how much interest Smith received.

Reached by phone, Sherman's attorney Kevin Tynan declined to comment on the fraud claims but said Sherman has "been a good lawyer for many years."

The town announced today that it contacted the Florida Department of Law Enforcement "to begin an investigation into serious allegations made against" Sherman.

Smith says he had trusted Sherman as his lawyer for business and real-estate deals for decades. Sherman had a solid reputation as a corporate attorney, and his family firm touted its representation of Dan Marino, Floridian Community Bank, and the St. Andrews Country Club.

So in 2016, when Sherman talked up the prospect of making a quick profit on investments in Bay Harbor Islands development projects, Smith had little reason to be suspicious. Between 2016 and mid-2019, Smith wired more than $4.5 million to Sherman for what he thought were loans for developers of the Grand Beach Hotel and the Wharton Kane Concourse complex, among other projects. Sherman assured him there was no conflict of interest — supposedly town officials knew Sherman was marketing "development rights" in local projects while serving as town attorney.

Smith became wary when his interest checks stopped coming this past August. Sherman told him a "moratorium" on some of the development projects was to blame. But a phone call Smith placed to local building officials revealed something was awry. For one, he learned the Wharton Kane Concourse project had not even been approved.

Sherman allegedly tried to keep the ruse going until the October meeting in his law office. That's when he spilled the beans, and Smith learned the money was never forwarded to any developers, according to court documents. The investments were fabricated, and the interest checks had been coming from Sherman himself, Smith says.

Sherman stepped down from his post as town lawyer a few weeks after allegedly admitting the fraud to Smith. He told Bay Harbor Islands he was resigning due to "personal reasons" and his age, 77. He was working under a $7,900-a-month retainer contract with the town at the time of the resignation.

Bay Harbor Islands' new lawyer says the town and its council had no knowledge of Sherman's dealings with Smith.

"These are allegations that tangentially concerned the town. The council had no role. There were private representations made to Smith, with no knowledge from the town itself," says Bay Harbor Islands' new attorney, Frank Simone.

In a letter Sherman wrote earlier this month to surrender his law license, he made "no admissions" but wrote he "would agree that there is a factual predicate for disciplinary action."

His disciplinary record appears to have been clean in Florida until the recent allegations by Smith.