Convicted of fraud, GPB executives object to plans to return money to investors

Investors in high-risk private placements managed by GPB Capital Holdings have not seen any return from their investments since 2018, the last time any of the six funds paid out distributions to clients. 

After years of court battles and delays, that could be changing. 

In January, a court-appointed receiver in charge of distributing assets to 17,000 investors who bought $1.8 billion of GPB limited partnerships starting in 2013 submitted a plan to begin return money to investors. 

There will be winners and losers among the GPB investors waiting to get money back.

According to the receiver, the estimated range of recovery for some GPB clients is expected to be nothing, while others could receive back 80 cents to 100 cents on the dollar. Investors in one fund, GPB Cold Storage, could see gains of 40 percent to 50 percent.

But the latest roadblock in the return of investor money is a series of objections, including those by GPB executives convicted last summer of fraud.

The GPB receiver’s plan to return money to investors was filed in federal court in Brooklyn last month. On February 7, GPB founder and CEO David Gentile and broker-dealer chief Jeff Schneider filed a series of objections to the plan, claiming it would prevent them from receiving legal costs that were part of an earlier court ruling.

Gentile and Schneider in August were convicted of fraud and conspiracy after a seven-week trial in federal court in Brooklyn. They are scheduled for sentencing April.

The GPB executives’ objections to the plan to return money to investors drew criticism from industry attorneys and compliance executives.

“The audacity of these guys to hold back payment to these individuals who haven’t seen a dime in six years is outrageous,” said Adam Gana, a plaintiff’s attorney. “The court needs to move swiftly this year and compensate these people for time lost and any money they have been able to recover.”

“It’s horrible that this consideration even needs to be made,” said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “These executives are the people who put the company, GPB, in this position and are now victimizing the victims all over again by preventing the distribution of funds to investors.”

Matt Menchel, an attorney for Gentile, did not return a call Wednesday afternoon to comment.

Founded in 2013, GPB Capital saw incredible growth selling its high-risk private placements through dozens of independent broker-dealers and five years later had raised $1.8 billion from wealthy clients looking for yield in a decade when interest rates were next to zero.

The firm had more than a half-dozen funds and targeted a steady 8 percent annual return to investors. Led by Gentile and Schneider, GPB first started ringing alarm bells in 2018, when it came to light that the company and its largest funds had failed to make timely required filings, including audited financial statements, with the Securities and Exchange Commission.