A federal judge in Brooklyn this week turned down efforts by senior executives at GPB Capital Holdings executives who, after being found guilty of fraud and conspiracy last August, wanted a new trial.
According to several news reports, GPB Capital’s founder and CEO, David Gentile, and broker-dealer and distribution chief, Jeff Schneider, won’t get a new trial or their indictments tossed after a jury convicted them of a Ponzi-like fraud that prosecutors said risked more than $1.8 billion from thousands of investors.
Judge Rachel P. Kovner on Tuesday denied Gentile and Schneider’s requests for a judgment of acquittal and new trial in the US District Court for the Eastern District of New York, according to Bloomberg News.
Kovner also denied Gentile’s motion, which Schneider joined, to dismiss the indictment based on prosecutorial misconduct, according to Bloomberg. They are scheduled for sentencing in April.
“At what point do you acknowledge the fact you mishandled customer funds,” said one senior industry executive who spoke privately about the matter to InvestmentNews. “I’ve seen lots of denial in this business but this GPB thing take the cake.”
Most recently, court filings in GPB’s receivership revealed that GPB Capital, which hasn’t paid out a nickel to clients since 2018, has underwritten the legal costs of Gentile and Schneider to the amount of $75 million.
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. GPB primarily invested in car dealerships and trash hauling businesses.
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. Investors stopped getting distributions, akin to dividends, from GPB seven years ago.
Federal prosecutors during their trial last summer charged that Gentile and Schneider used phony, back-dated documents and paid distributions, or dividends, to investors using their own money, rather than coming clean and admitting that the performance of GPB funds was not as steady as it appeared.
In February 2019, the FBI raided GPB offices in Manhattan. Two year later, the Justice Department and the SEC charged Gentile, Schneider and another senior executive, Jeffrey Lash with a number of fraud counts, including creating a Ponzi-like scheme and securities fraud, wire fraud, and conspiracy. Lash pleaded guilty in 2023 and testified against Gentile and Schneider last summer during their fraud trial in Brooklyn.
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