Josh Schuster pleaded not guilty Friday to charges he defrauded investors in his New York real estate projects out of more than $10 million in a Ponzi-like scheme.
Appearing at the Daniel Patrick Moynihan federal courthouse in Lower Manhattan, the 41-year-old developer wore a blue suit, his long hair cut short, as his attorney entered his plea on federal fraud charges.
Judge Valerie Caproni was surprised by Schuster’s youthful appearance.
“You’re Mr. Schuster?” she asked. “I thought you might look a little older based on what the charges are.”
Caproni acknowledged the complexity of the case and said it will likely take some time for the prosecution and defense to prepare for trial, which she said will likely be around March or April next year.
Schuster was arrested in Florida last week on one count each of wire fraud and securities fraud brought by the U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation.
The Boca Raton resident was released on a $2 million bail and ordered to appear in New York for his arraignment. He faces a maximum sentence of 40 years in prison if convicted.
According to the allegations, Schuster told investors in his Silverback Development projects that their capital would be used in specific projects in Gramercy Park, Long Island City and the Bronx. But instead, he allegedly used their money to pay off personal expenses like a $1 million credit card bill and thousands of dollars in gambling debts, as well as payroll for his company unrelated to those investments.
In a Ponzi-like fashion, Schuster allegedly used money from new investors to pay off existing ones.
In addition to criminal charges, the Securities and Exchange Commission also filed a civil case calling for Schuster to return the money he allegedly stole and barring him from selling unregistered securities.
A grandson of Jack Schuster — an executive who worked with the likes of the Zeckendorfs in the 1970s and 1980s — Josh was an ambitious young developer who worked for DHA Capital before striking out on his own in 2016 with $50 million from a pair of investors.
He gained a coveted endorsement when the $25 billion investment manager Silverpeak invested in a few of his deals and even let him use some of the spare space in its high-powered office overlooking Central Park.
But things started to unravel and whispers started to spread that Schuster was allegedly misallocating investors’ money. In 2021, The Real Deal published an investigation that first revealed the problems at Silverback and the allegations against Schuster.
His investors — many of them his friends and their family members — struggled with the question of whether Schuster was a young developer who got in over his head and made poor decisions or a dishonest person who intentionally defrauded those close to him.
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