On the same day Josh Schuster was arrested in Florida and charged by federal prosecutors with wire and securities fraud, the Securities and Exchange Commission filed a civil suit against the disgraced condo developer.
Like the criminal case, the civil complaint alleges that Schuster and his company, Silverback Development, defrauded investors out of millions of dollars. The SEC case centers around three unnamed investors in an ill-fated Gramercy Park condo project.
Schuster allegedly raised $6 million for the project from the investors, then used $2 million of the money to cover general expenses for Silverback and pay back investors of other real estate projects, the suit alleges.
“Mr. Schuster respectfully declines to make a comment at this time,” his attorney David M. Kubiliun said in an e-mail. “He looks forward to his day in court.”
Schuster lured investors by “pitching large returns on investment,” according to the suit. He allegedly promised two investors who pitched in a collective $650,000 in 2018 that they would at least double their investment.
The next year, Schuster allegedly convinced a man in his 70s to invest the proceeds from a recent real estate sale into the Gramercy Park project. The man contributed $5 million in return for 54 percent of the cash distributions from the project.
The man pumped another $750,000 into the development in 2020 and 2021, the suit alleges.
The money from the three investors was put into a bank account and most of it was spent on Silverback’s payroll and expenses, along with payments to Schuster and investors in other projects, the suit claims. None of the investors allegedly received any returns.
A series of frantic text messages between Schuster and Silverback’s controller in 2019 provides a glimpse into the company’s precarious financial state.
“Josh. Need to figure out Cash,” the controller wrote in one message included in the complaint. “For [two investors in other project] and we have [payroll] Thurs. & we have no $ for bonuses.”
In another message, the controller wrote, “I need to wire the $310+ for 2nd Ave in the am Where are we getting the $ from? And what am I telling [the two other investors]. they’re going to shoot me.”
Silverback had entered into a joint venture in 2017 to develop the project at 359 Second Avenue with the property’s owner, Argentinian developer Claudio Soifer.
The 53-unit condo project broke ground in January 2020. But Schuster’s partners removed him as general manager after the project’s lender sent a warning notice about its financials, sources told TRD at the time.
Around the time of Schuster’s removal, the partners ran a forensic audit that revealed roughly $2 million from the project’s coffers was unaccounted for, according to sources. Soifer sued Schuster over the project in 2021.
Schuster built a reputation as a young, rising real estate star. The $21 billion asset manager Silverpeak gave his career a boost when it invested in a few of Schuster’s initial deals and let his company use its office space.
Things went south when Silverpeak claimed the developer built his success atop a platform of lies and misconduct, ultimately booting him from the office. Then came allegations from former team members about alleged unscrupulous behavior, alongside investors claiming Silverback misled them. Court cases began to pile up.
Schuster has refuted many of the claims. He opened up to TRD last year, speaking candidly about his personal struggles.
The civil suit calls for Schuster to return the “ill-gotten gains” plus interest and civil penalties, and is asking the court to bar him from buying or selling any security that is not registered with the SEC.
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