The broker-dealer that primed the pump for much of the $1.8 billion in sales of GPB Capital Holdings private placements is shutting down.
That such an end would come to the broker-dealer, called Ascendant Alternative Strategies, is to be expected in the wake of the founders of GPB, David Gentile and Jeff Schneider, having been arrested and charged with fraud last month by the FBI. Gentile and Schneider also own the broker-dealer, Ascendant Alternative, which has offices in Austin, Texas and New York.
All alternative asset product manufactures like GPB have a selling broker-dealer, known as a wholesaler, to connect with other firms that sell the products. GPB invested primarily in auto dealerships and trash hauling businesses.
InvestmentNews recently reported that GPB and Ascendant used sales tactics such as linking the private placements to Wall Street banks and paying for client events at Madison Square Garden as part of the effort to sell the high-risk private placements.
According to the BrokerCheck report for Ascendant Alternative Strategies, the broker-dealer changed its official status with the Financial Industry Regulatory Authority Inc. on February 19 to "termination requested," meaning it was closing down. A broker-dealer closure takes two to three months to occur and is often referred to as a broker-dealer withdrawal in the industry.
Gentile and Schneider are listed as two of the owners of the broker-dealer, according to Finra. Ascendant Alternative Strategies last month was hit with a civil complaint from the Securities and Exchange Commission, which alleged its fraud in the wider criminal and civil charges against Gentile, Schneider and another partner, Jeff Lash.
From 2013 to 2018, GPB raised $1.8 billion from wealthy investors who bought the product in large part because of its promise of an 8% annual yield. In fact, according to GPB and court filings, GPB wound up paying the annual distribution from client capital and not returns from investments.
The SEC claimed that the "aura of success" at GPB, and the touting of the 8% distributions to clients, was an "illusion," according to the BrokerCheck report.
Meanwhile, in related news, GPB Capital Holdings last month agreed to the SEC's request to hire an outside, third-party monitor to be in charge of approving any transactions and maximizing shareholder value.
The SEC had asked a federal judge to put an outsider in charge of the business to protect investors who own GPB private placements and avoid any further potential problems at the firm.
A veteran attorney with a background in the auto business, Joseph T. Gardemal, is the new monitor. He is a managing director with Alvarez & Marsal with a background in forensic accounting and the auto industry.
Gentile is no longer in charge of GPB.
"Our firm has agreed to a monitor who has extensive experience in the automotive sector, and the businesses we own and manage that employ thousands of workers," a GPB spokesperson wrote in an email. "This expertise will be important to investors as we work with Mr. Gardemal to reach our shared goal of increasing the value of GPB’s assets and maximizing cash flow."
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