“The U.S. Department of Justice announced the indictment Thursday of three individuals affiliated with GPB Capital, a New York-based private placement shop, with securities fraud, wire fraud and conspiracy in a scheme that raised over $1.7 billion from investors. GPB’s owner and CEO David Gentile, Jeffry Schneider, owner of GPB’s placement agent Ascendant Capital, and Jeffrey Lash, a former managing partner at GPB, have been arrested, each facing up to 20 years in prison.
In a parallel action, the Securities and Exchange Commission has also charged GPB Capital and Ascendant, which marketed securities issued by GPB, with fraud. The three men are also named in the SEC’s complaint, which claims they were running a Ponzi-like scheme. The SEC also charges GPB with violating whistleblower protection laws.
Seven state securities agencies also filed regulatory actions against GPB, including Alabama, New York and New Jersey, which filed civil complaints. Georgia, Illinois, Missouri and South Carolina launched administrative proceedings with help from Texas.
The SEC claims that Gentile and Schneider lied to investors about where the 8% annualized distribution payments were coming from, telling investors the money came from profits generated by GPB’s portfolio companies. In reality, they used investor funds to pay portions of the distribution payments, the SEC said. The executives allegedly manipulated financial statements to conceal their wrongdoing.
GBP and Ascendant also misrepresented the fees and compensation they were receiving, the SEC claims. Further, the firm had language in termination and separation agreements that prevented individuals from coming forward about the violations.
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GPB also faces several pending class action lawsuits, as well as other complaints against it, alleging it’s a Ponzi scheme. One law firm, Peiffer Wolf Carr Kane & Conway, filed three dozen FINRA arbitration claims last summer across 12 brokerage firms that invested client money in GPB. The law firm also has a pending class action lawsuit against the firm in Texas, claiming Ascendant brokers made over $800,000 in commissions in a single month from GPB.
Peiffer estimates that GPB was sold to over 2,000 investors, with losses of up to $1.8 billion, and that some 60 brokerage firms participated nationwide.
“It’s a good day for the investors of GPB because this is proof that people are paying attention to their plight,” said Jason Kane, partner at Peiffer Wolf Carr Kane & Conway. “They were victimized by what now the U.S. government and a whole lot of state governments agree was a Ponzi scheme.”
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Wealth Management | Diana Britton | February 4, 2021
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