Investors say they were duped by Yale graduate

In many ways, Joshua Bryce Newman fits the part of the young, successful entrepreneur.

A 35-year-old Yale graduate, Newman began investing in Internet startups during his junior year. After college, he ran an independent movie production company in New York and helped found two popular CrossFit gyms in Manhattan. His website cites several news articles that describe him as “a Silicon Valley pro” and “an Internet elder statesman,” and as being “sharp and supremely confident.”

But some of the nearly two dozen people who have either invested with Newman or lent him money over the last decade paint a less favorable picture. In lawsuits that have been filed against Newman or companies he controls, investors say he has a history of bouncing checks, unpaid debts and misrepresented intentions.

While the total amount in dispute appears to be rela-

tively small — roughly a few million dollars — the way Newman has managed to raise money easily from sophisticated businessmen, many with a track record of investing in Internet startups, is a vivid reminder of how the right connections and a strong sales pitch can seduce investors, even after the financial crisis.

The investors include a co-founder of a social messaging site that was acquired by Google and a founder of an online apparel company. They were typically introduced to Newman at a Yale event, in a casual meeting at the Sundance Film Festival in Utah or on the recommendation of someone in the closeknit community of angel investors.

Several investors, some of whom declined to speak on the record because of continuing litigation, said they had been reassured by Newman’s background and by favorable media cov- erage, including several articles in the New York Times. Due diligence can be an afterthought for investors in startups and independent movies, businesses in which failure is not uncommon. And, indeed, few said they had looked into Newman’s past by checking court records or lien filings before investing in his projects.

‘He is cool’

“Two people I know vouched for him and said, ‘He is a friend of ours and is cool,’ ” said Richard Webb, a New York angel investor and marketing consultant who has invested in tech startups including Circa, Foursquare and Percolate

Webb lent $250,000 to Newman in 2010 and won a court-ordered judgment against him the following year when the loan was not repaid.

“He would do a lunch with me and try to make it all good,” Webb said. “He came up with a couple of thousand dollars in 2012, and then he disappeared.”

While lenders and investors describe a pattern of such behavior, Newman’s string of bad debts may simply be a reflection of poor business skills.

Newman said in an interview that he understands that his investors are upset but that he had made a good-faith effort to repay some of them. He declined to comment further on the record, except to say that he is working on a plan to reimburse investors to whom he owed money.

“The sane thing would have been for me to bankrupt myself,” Newman said. “For seven years, I’ve tried to make everyone whole.. It’s the morally right thing to do.”

This month, Newman made a $50,000 payment to Joshua Adler, a real estate investor who lent $100,000 in November to Outlier Capital, a small venture capital firm that Newman controls. In March, Adler, a Yale alumnus, sued Newman and Outlier in Delaware state court, saying that Newman had defaulted on the loan and refused a request to repay it.

“Mr. Adler recently received a payment on behalf of Mr. Newman,” said John Harris, Adler’s lawyer. “That payment reduces, but does not satisfy, the amount in controversy.”

Several investors said they are concerned that Newman is raising money for new ventures, including one that supposedly has an equity investment in the National Pro Grid League, teams that compete in various feats of strength.

In September, a lawyer for the eight-team league, which had its inaugural season last year, sent a cease-and-desist notice to Newman telling him to stop telling prospective investors that he is raising money for the league, according to documents reviewed by the Times, which show that Newman told investors that he intended to raise $5 million for the league.

CEO James Kean said Newman is “not affiliated” with the league in any way.

The trail of litigation against Newman began with Cyan Pictures, an independent movie production company he founded in 2002, a year after graduating from Yale. It bet much of its success on a low-budget movie based on a novel about the New York Yankees.

The movie was never made, though the rights to the project are still held by Samarian Productions.

Short-term loans

It is not clear if Newman ever raised the $9 million that he had said would be needed to begin making the film. But his struggles prompted him to take out short-term loans — many of which he later defaulted on, court records show.

Newman graduated from Palo Alto High School in 1997, just as the first Internet boom was taking hold. At Yale, Newman majored in cognitive science, a field that combines elements of computer science, neuroscience and psychology. By his junior year, Newman has said, he was a managing partner in the Silicon Ivy Venture Fund, which provided seed money to startups backed by college students.

The Wall Street Journal featured him in an April 2000 article about dorm-room venture capitalists. A number of other business publications, including Forbes, also wrote profiles of Newman.

He entered a business partnership with three others in 2004 to open CrossFit NYC, a gym that focuses on extreme strength and conditioning programs. Newman has appeared in three Times articles discussing the popularity of such training methods.

Last summer, Newman’s partners, after learning that he had been accused of misleading investors, dismissed him from the company.