GPB Capital Holdings: Securities and Exchange Commission has Sued GPB for Securities Fraud, Alleging it is a Ponzi Scheme
Were you advised to invest in GPB Capital Holdings? If so, you may be entitled to recovery of your investment losses through the FINRA Arbitration process and GPB Capital lawsuit. Contact a respected investment loss lawyer for more information.
Individual stock brokers and brokerage firms across the country have previously suggested that their clients invest in GPB Capital Holdings and GPB’s individual limited partnerships.
However, it was later discovered that these holdings companies were simply part of a massive, $1.8-billion Ponzi scheme that operated by partnering with independent brokers and brokerage firms to sell private partnerships in these holdings to wealthy investors in exchange for high commissions of 8% or more. As set forth herein, on February 4, 2021, the Securities and Exchange Commission and several state securities regulators (SEC) filed enforcement actions against GPB, alleging, among other things, that it paid investor dividends with funds received from other investors instead of business revenues. This complaint reinforces the concern regarding investor losses in GPB.
If you were promised considerable, single-digit returns in exchange for entering into one of these private partnerships, you have recovery options. The highly experienced investment loss attorneys at Wolper Law Firm are representing aggrieved GPB investors around the country and are prepared to help you recover your investment losses.
GPB’s Ponzi Scheme
A Ponzi scheme occurs when an investor doesn’t receive returns from generated income, but rather from the investment money of other investors. This is exactly what GPB Capital Holdings has been doing.
Rather than generating an 8 percent return to investors, as promised when the investor purchased private partnerships, the company would instead issue returns that were equal to or less than the investor’s capital, usually with their own investment or that of other, new investors.
Not only were these private partnership returns being paid with the investment of newly recruited investors, but GPB holdings eventually ceased paying dividends altogether and the principal value of the funds declined precipitously.
Many investors suffered considerable losses as a result of the GPB Capital Ponzi scheme. GPB’s family funds have declined between 40 and 70 percent over the last year and it has not released audited financials in nearly two years. As a result, investors are left not knowing what GPB financial services funds are worth.
Affected Private Placement Investments
Approximately 60 broker-dealers across the U.S. sold funds totaling nearly $1.8 billion in investments marketed as private equity opportunities to investors.
The broker-dealers failed to conduct adequate due diligence prior to recommending these offerings to their retail clients.
GPB issued several individual limited partnerships that may be the cause of your investment losses. Some of these include:
- GPB Scientific, LLC
- GPB Cold Storage, LP
- GPB Automotive Portfolio, LP
- GPB NYC Development
- GPB Holdings II, LP
- GPB Holdings, III, LP
- GPB Holdings, LP
- GPB Holdings Qualified, LP
- GPB Eurobond Finance PLC
- GPB Waste Management, LP previously known as: GPB Waste Management Fund, LP
If you have invested in any of these previously mentioned private placement investments, and are interested in learning more about how to ensure you are able to hold GPB Capital Holdings and the broker-dealers who defrauded you accountable for their misconduct, reach out to a qualified investment loss lawyer.
The Class Action Lawsuit
In October 2019, a class action lawsuit against GPB was filed in the U.S. District Court for the Western District of Texas. Plaintiffs in this case allege that GPB was, in fact, operating a Ponzi scheme. This is one of several GPB class action lawsuits now pending.
These scams always fail, and cost investors substantial losses. But GPB tried to mask the scheme, and it’s inevitable failure, by telling investors they would receive continuous returns amounting to 8 percent of their initial investment, annually, through “healthy cash flows” and generated income from the private partnerships.
As with all Ponzi schemes, these returns were often covered not by the “healthy cash flow” of the private partnership, but instead by the initial investments of new investors.
Other GPB Investigations
In addition to the class action lawsuit filed against GPB Capital Holdings, on February 3, 2021, the Securities and Exchange Commission filed an enforcement action against GPB, its founder, David Gentile, its affiliate broker-dealer and business associates. The Complaint alleges “This case concerns a long-running and multi-faceted fraudulent scheme perpetrated by GPB Capital, a registered investment adviser; its owner and CEO, Gentile; AAS, a registered broker-dealer, and its branch office, Ascendant Capital; Schneider, the owner and CEO of Ascendant Capital; and Lash, a former managing partner of GPB Capital.”
Several states also filed complaints or have undertaken investigations, including Alabama, New Jersey, New York, Georgia, Illinois, Missouri and South Carolina.
A copy of the SEC Complaint be accessed by clicking here.
The SEC complaint follows a similar enforcement action filed by William Galvin, the Commissioner of the State of Massachusetts Securities Division. A copy of the Massachusetts Complaint can be accessed by clicking https://www.sec.state.ma.us/sct/current/sctgpb/2020-5-27-MSD-GPB-Complaint-E-2018-0100.pdf.
The Massachusetts Complaint is also a scathing commentary on the business practices of GPB, which have been well documented by the Wolper Law Firm over the last year. According to the Massachusetts Complaint, GPB made material misrepresentations to investors by promising them 8% investment returns paid solely from operational capital and revenue. These representations were reinforced in private placement memoranda and marketing materials. However, as GPB continued to acquire new investors, it failed to deploy the capital into new business ventures. Instead of suspending investor dividends until such time as the capital could be deployed in order to generate revenue for the various GPB funds, GPB continued to pay dividends to investors. Because the revenue of the GPB funds was less than their distribution requirements, the dividends were paid with investor capital. Consequently, without a rapid appreciation of profits and revenue, GPB was completely reliant on new investor capital to meet its dividend requirements.
There have also been numerous arbitration complaints against affiliated broker-dealers, who sold GPB. These same broker-dealers are also under investigation by several other regulatory entities, including the Federal Bureau of Investigation (FBI), the U.S. Securities and Exchange Commission (SEC), the Massachusetts Secretary of the Commonwealth, the Financial Industry Regulatory Authority (FINRA) and the Department of Justice.
In fact, in October 2019, after the 2019 GPB Capital investigation, the Department of Justice charged GPB Holdings’ chief compliance officer, Michael S. Cohn, a former SEC examiner, with obstruction of justice in relation to an SEC investigation into GPB Capital Holdings, LLC.
These GPB Capital SEC investigations and FBI investigation have made headlines since September 2018, and with thousands of other wronged investors across the U.S. waiting to see what happens with GPB Holdings and their returns, it’s only a matter of time before GPB Capital Holdings and their broker-dealers be held accountable for their misconduct.
Victimized? How to Recover Your GPB Capital Losses
Investors recognize and accept the risks that come with investing. But, when a broker-dealer or company is engaging in fraud, such as the alleged GPB Capital Holdings Ponzi scheme operated by David Gentile, Jeffrey Schneider, and other operating partners, you may be able to claim financial restitution.
Remember, brokerage firms that sold GPB do not have unlimited resources at their disposal, and insurance only covers the limits of their policy. As a victim of GPB Capital fraud, your opportunity to recover your investment and losses is limited. You can take action against the broker-dealers who have wronged you by initiating FINRA arbitration complaints against them for full recovery of your losses.
You may also be able to enter into the Class Action lawsuit against GPB to maximize your financial restitution. Contact our office to learn more about your legal options.
Get in Touch with a Reputable Investment Loss Attorney
If you invested in a private partnership with a GPB Capital Holdings company and are interested in learning more about your next steps toward a GPB Capital lawsuit, reach out to a qualified investment loss lawyer at Wolper Law Firm for assistance.
You can schedule a no-cost case evaluation by calling us at 800.931.8452 or completing the online contact form at the bottom of this page.
For more of the latest GPB Capital investment news regarding GPB Holdings lawsuits and investment recovery, check out our blog or contact our firm to speak with an attorney.