Judge OKs release of $400 million to besieged GPB investors

A federal judge in Brookly last week approved the release of $400 million in funds to some of the beleaguered investors in GPB Capital Holdings who have not seen a nickel or returns since 2018, when the private placement investment scheme began to unravel.

Meanwhile, the sentencing of two top GPB executives, founder David Gentile, and broker-dealer and sale chief Jeff Schneider, was scheduled for this week but has been moved to May, according to court filings.

Last August, a jury in federal court in Brooklyn found Gentile guilty of five counts of fraud and Schneider three. The federal government’s charges stemmed from their management of GPB Capital Holdings, which was founded in 2013, GPB Capital.

The money manager sold 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 ago when interest rates were next to zero.

But when the funds’ performance lagged, the defendants tried to disguise the shortfall with fraudulent, back-dated documents and paid investor distributions out of investor capital, according to the U.S. Attorney’s Office. 

Investors haven’t seen any money from GPB since 2018; prior to that, GPB had more than a half-dozen funds that invested primarily in auto dealerships and trash hauling businesses and targeted a steady 8% annual return to investors. 

“The return of capital is something positive, finally although it’s not the entirety of investors’ capital,” said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “The perpetrators going to jail is something that needs to happen for these clients to have some sense of justice.”

The judge overseeing the GPB receivership, Margo K. Brodie, ruled on April 8 to grant the receiver’s motion to disburse $400 million of funds. In the order, Brodie dismissed several objections to the disbursement of funds, including objections from Gentile and Schneider.

Investors in three funds will receive payments as part of the initial distribution plan: GPB Automotive Portfolio, GPB Holdings II and GPB Cold Storage.

According to court filings, there is another $719 million in cash reserves.

Over the winter, it was revealed that GPB was underwriting the legal cost of Gentile and Schneider to the amount of $75 million.