Joshua Newman ’01, Internet and business entrepreneur, was arrested last week for defrauding investors out of more than $2 million dollars.
According to the 13-page criminal complaint filed on May 20, Newman has been charged with two counts of wire fraud over a three-year period, a penalty that carries a maximum sentence of 20 years in prison on each count. Newman, who the report described as a “self-styled entrepreneur,” came under scrutiny for a variety of business deals he engaged in from 2012 through April 2015, including work through his movie production company, his venture capital investments and the CrossFit training businesses enterprises he planned to operate. On Thursday, Newman was arrested at his Manhattan apartment by the FBI and was ordered to post a $300,000 bond at his first court appearance later that afternoon, the New York Times reported.
“Newman found himself facing mounting legal and financial troubles largely as a result of judgments and liens filed against him and his film production company, Cyan Pictures, after its project about the New York Yankees failed,” the complaint stated. “Using doctored or bogus documentation, Newman lulled his victims into believing that their investment money was safe or that he was in a position to repay their loans.”
Prior to his legal woes, Newman, whom Time Magazine described in 2000 as “a Silicon Valley Pro,” had a long career of capital venture projects dating back to his time as an undergraduate at the University.
According to his website, Newman founded a Web consulting firm as a freshman before serving as a managing partner of the Silicon Valley Ivy Venture Fund, a firm which invested in campus start-ups, beginning in his junior year.
Beyond his interest in tech entrepreneurship, Newman stirred controversy on campus as a founding member of “Porn ’N Chicken,” a club that claimed to bring students together to watch pornographic film and eat Popeyes fried chicken. The club’s efforts to make an adult film in Sterling Memorial Library, entitled “The StaXXX,” even inspired a feature-length film created by Comedy Central, according to a 2002 News report.
But in the years following his time at Yale, Newman racked up a series of debts, soliciting investments for his fitness studios and misallocating the funds for personal gain, the complaint stated. He was charged with using doctored operating agreements, creating false statements of ownership percentages and submitting bogus annual partnership gain and loss reports to the IRS.
“The investigation reveals a pattern of activity by defendant Newman whereby he made material misrepresentations to solicit investments and loans purportedly for business enterprises he was developing,” the complaint states. “When his true intent was to use the money for his own purposes, including to repay others who had previously invested in, or lent money to, one of his projects.”
His company, Cyan Pictures, faced financial pressure following its failed attempt to create a fictional film about the New York Yankees, entitled “Keeper of the Pinstripes.” A judgement was filed against Newman in 2011 for over $400,000, and similar judgements totaling hundreds of thousands of dollars were entered against the company at this time as well, the complaint explains.
This alleged fraudulent activity also carried over to his CrossFit businesses, as Newman was charged with continuing to solicit investments for personal use even after his partners removed him from the company. The two fraudulent wire transfers included a December 2014 transfer of $55,000 and a $250,000 transfer in February 2015.
In court last Thursday, Newman did not enter plea. Both Newman and his lawyers could not be reached for comment as of Wednesday evening.