Silverback's Josh Schuster Arrested On Fraud Charges

Josh Schuster, who rose to prominence as a young New York City development hotshot, now faces decades in prison for allegedly defrauding investors in his projects out of more than $10M.

Schuster founded Silverback Development in 2016 at the age of 32. Now, at 41, the Department of Justice and the Securities and Exchange Commission allege that, since at least 2018, he lied to investors, diverting money he promised would go into developments into his own accounts to pay off credit cards, gambling debts and other aggrieved investors.

Schuster was arrested Wednesday and charged with one count of wire fraud and one count of securities fraud, each of which carries a maximum sentence of 20 years in prison, the DOJ announced.

Schuster didn't immediately respond to calls or emails requesting comment. He now lives in Boca Raton, Florida, and co-founded a solar panel commercial leasing business.

According to the federal government's legal filings, Schuster used investor money to fund a lavish lifestyle, including to cover more than $1M in personal credit card payments, tuition at a New York City private school and hundreds of thousands of dollars in gambling losses. Additionally, the funds went toward repaying earlier investors in a “Ponzi-like fashion” and to cover unrelated business expenses and payroll, according to the DOJ indictment.

In one December 2019 instance cited by the DOJ, Schuster received $5M to develop a Gramercy Park project at 351-359 Second Ave. But “almost immediately,” he used those funds to pay off two loans, including $137K for a personal credit card bill and $100K in gambling debt, along with paying earlier investors and Silverback payroll.  

The DOJ alleges that a similar scenario took place at a Queens project in 2019 and 2020 after an investor provided approximately $23.6M and co-signed a $40M construction loan. In that case, Schuster allegedly used the funds to pay off a $180K credit card bill and a nearly $133K repair bill. Another $50K went to a different investor.

He then did so again in 2021, using $140K from the project to pay off his credit card, according to the indictment.

In its complaint, the SEC targets Silverback's Gramercy project, claiming Schuster misappropriated more than $2M of roughly $6M raised for the development from three different investors.

The SEC references several times where millions of dollars were transferred to various bank accounts controlled by Schuster and Silverback. 

The SEC lawsuit also says Schuster continued to solicit additional capital after misappropriating initial investments and that the firm “knowingly or recklessly” failed to disclose financial information about the project in its offerings. That includes selectively disclosing certain loans while leaving out information about loans that were in default, according to the complaint.

Revenues still haven't been distributed to investors, the complaint says.

In addition to the DOJ's charges, the SEC is asking a judge in the District Court for the Southern District of New York to order Schuster and Silverback to return “all ill-gotten gains” and pay civil penalties while prohibiting him from making any unregistered securities offerings.

The development at the heart of the SEC complaint is a 53-unit condo in Gramercy, which Schuster planned to develop through a joint venture with Argentine investor Claudio Soifer. The project ran into issues following the onset of the pandemic.

After defaulting on his mortgage agreements, Schuster and Silverback were removed from the project. Following his removal, a forensic audit revealed roughly $2M from the project’s coffers were missing, The Real Deal reported in 2021, citing two unnamed insiders.

Soifer sued Schuster over the project in July 2021, and the initial complaint echoes many of the charges in the SEC's lawsuit. That case is ongoing.

Schuster, the grandson of famed NYC project executive Jack Schuster, also faced litigation over a $25K gambling debt from The Mirage hotel and casino in Las Vegas, along with $15K in interest from a stay during ICSC’s 2019 real estate conference. His landlord in Florida has accused Schuster of owing $150K in back rent, while another on the Upper East Side has claimed that he owes $250K in rent, utility bills and other expenses at his luxury apartment.

Schuster has acknowledged being overwhelmed at his projects, resulting in the litany of litigation. 

“There are a lot of best friends I’ve lost,” Schuster told TheStreet in 2023. “There are a lot of business relationships that were super close that I’ve thrown away, and I have to look at myself in the mirror, and it’s hard to shut the door on the past.”

In more recent years, Schuster has been attempting a comeback. He co-founded Solarback, which brings solar energy to commercial real estate through master leases or joint ventures. 

“It has taken me a good year, at least, to come to the conclusion that I have to stop hoping for a better past,” he told TheStreet. “The past is done. I can’t change it. And now I just need to take those lessons, look forward, and hopefully be better all around.”