Arthur Simon Flegenheimer was born into a Jewish family of German immigrants in New York City on August 6, 1902, the Feast of the Transfiguration. Early in his life his father abandoned the family, and life was harsh for Arthur, his mother and his younger sister. He dropped out of school in the eighth grade to help support the family. He quickly fell into a life of crime and by age 18 was serving a prison sentence. He was paroled on December 8, 1920, the Feast of the Immaculate Conception.

Going to work for Schultz Trucking, he swiftly returned to crime. Among his gangland colleagues he adopted the nom de crime of Dutch Schultz. Gangster Joey Noe hired him in 1928 to work as a bouncer at a small speakeasy, Hub Social Group. Impressed by his brutality and ruthlessness, Noe took Schultz into partnership and soon he became wealthy owning with Noe a chain of speakeasies. The Noe-Schultz gang quickly became a power in Manhattan, the sole non-Italian gang to rival the five Italian crime organizations that would later merge as the founding five families of the American Mafia.

The expansion into the upper west side of Manhattan, brought Noe and Schultz into conflict with Irish-American gangster Jack “Legs” Diamond. War breaking out between the gangs, Joey Noe was gunned down and died on November 21, 1928. Schultz was crushed by the loss of his friend and mentor.