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GPB Capital: What To Do If You Lost Money in “Ponzi-Like” Scheme
The Securities and Exchange Commission as well as numerous state securities regulators have accused GPB Capital, an asset manager and investment adviser, of running a “Ponzi-like scheme” that defrauded its investors. A civil action initiated by the SEC in 2021 specifically charges GPB Capital, its owner David Gentile, and other people and entities associated with the company, alleging they lied to investors and manipulated financial statements.
What Is GPB Capital?
According to the SEC’s complaint, GPB Capital is an “alternative asset management firm that acts as a general partner and fund manager for limited partnership funds.” Based in New York, the firm primarily invested its funds in automotive retail, waste management, and healthcare businesses. It acted as investment manager and/or general partner for:
-GPB Automotive Portfolio, “a private investment fund formed to acquire and operate automotive dealerships,” which raised about $675 million during an unregistered offering starting in July 2013;
-GPB Holdings I, a limited partnership “formed primarily to acquire and operate automotive retail, managed IT services and life sciences companies” which raised about $193 million in an unregistered offering that began in March 2013;
-GPB Holdings II, a limited partnership “formed primarily to acquire and operate automotive retail and managed IT services companies, and to pursue other special situations and debt strategies,” which raised about $680 million in an unregistered offering that began in April 2015;
-GPB Waste Management, a limited partnership “formed primarily to acquire and operate waste management companies,” which raised about $173 million in an unregistered offering that began in June 2016;
-and GPB Cold Storage, a limited partnership “formed primarily to acquire a freezer warehouse and the accompanying real estate,” which raised about $57 million in an unregistered private offering that began in July 2015.
Who Invested in GPB Capital?
The SEC’s charges state that since GPB Capital was founded in 2013, it raised more than $1.7 billion from 17,000 or so investors across the country, “”approximately 4,000 of whom are seniors.” The company suspended its redemptions in 2018, leaving almost the entirety of the $1.7 billion it raised “at risk.”
Is GPB Capital a Ponzi Scheme?
GPB Capital allegedly “projected an aura of success” to its investors and prospective investors, according to the SEC, claiming it “consistently made an 8% annualized distribution payment to investors” in addition to occasional “special distributions” of up to three percent. The company, its owner David Gentile, and broker-dealer Ascendant Alternative Strategies allegedly stated in marketing and offering materials that these distributions were paid “exclusively with funds from operations of the Portfolio Companies.” These representations were false, according to the SEC: in reality, GPB Capital allegedly paid distributions in part with investor funds.
GPB Capital and its control persons allegedly undertook several strategies to conceal their fraud. According to the SEC’s complaint, the company, Gentile, and its former managing partner Jeffrey Lash “manipulated the financial statements for two of the limited partnership funds in the early years of the offering to give the false appearance to prospective investors and investors that the Portfolio Companies were generating sufficient income to cover the distribution payments to investors.” GPB and Ascendant Capital, its placement agent and a branch office of Ascendant Alternative Strategies, allegedly “made material misrepresentations and omissions” regarding the “millions of dollars in fees and other compensation” earned by Gentile, Ascendant Capital’s CEO Jeffry Schneider, and Ascendant. It was by keeping investors “in the dark” about GPB’s true financial situation, the SEC alleges, that the fraud was able to continue for at least four years during which GPB did not provide investors with audited financial statements for the LPs in its portfolio.
In a statement about the SEC’s charges, the agency’s New York Regional Office Director Richard Best said: “As alleged in our complaint, the defendants told investors that they would be paid distributions from profits of the portfolio companies when, in reality, many of the payments were being made from the investors’ own funds. “This action shows our continued pursuit of those who deceive investors and conceal their misconduct to reap profits for themselves.”
Federal Charges Against GPB Capital’s Founder/CEO
On February 4, 2021, the U.S. Attorney’s Office for the Eastern District of New York announced charges against GPB Capital founder and CEO David Gentile; Ascendant Capital owner and CEO Jeffry Schneider; and former GPB Capital managing partner Jeffrey Lash, alleging that they engaged in a fraud to deceive investors. The defendants were all arrested on that day.
“As alleged, the defendants misrepresented the holdings of GPB Capital through deceptive marketing practices, luring investors with promises of monthly distributions that would be covered by funds from the investments and not drawn from underlying invested capital,” said then-Acting U.S. Attorney Seth D. DuCharme in a statement about the charges. “As we allege today, however, this was all a lie. In truth, a significant portion of GPB’s distributions were paid directly from investor funds. Investment fraud schemes are not only problematic for the victims they claim, but for the overall investing public who loses faith in a free-market system every time they hear of crimes like this.”
State Charges Against GPB Capital
It’s not just the SEC that has filed charges against GPB Capital. Securities authorities in Alabama, Georgia, Illinois, Missouri, New Jersey, and South Carolina also filed simultaneous actions against the alleged Ponzi scheme in February 2021. The Missouri Securities Division described GPB Capital as “massive fraud scheme originated” affecting “affected tens of thousands across the U.S., including 255 Missourians.” New Jersey Attorney General Gurbir S. Grewal said that 700 investors in the state were impacted by the alleged fraud. In South Carolina, Attorney General Alan Wilson alleged that at least 320 residents were victims of GPB Capital. “These individuals solicited millions of dollars from citizens in South Carolina by false promises and misleading statements, and the Attorney General’s Office has taken action to bring these individuals to justice,” he said of the defendants. “They now face the full force of authorities determined to hold each of them accountable for their role in this well-orchestrated, nationwide investment scheme.”
GPB Losses? Call Carlson Law for a Free Consultation Today
Carlson Law represents investors involved in claims against financial advisors and investment firms throughout the United States. If you or a loved one have suffered losses investing in GPB Capital, please call us at 888-976-6111 or complete our contact form for a free and confidential consultation.