In what appears to be a victory, albeit a tardy one, for the investors in the moribund private placements of GPB Capital Holdings, which has been charged with fraud, the company will move into receivership after a battle by its founder and CEO, David Gentile, to have it remain under the guise of a monitor.
That means that the 17,000 investors, many of them senior citizens, may be moving closer to a date when they get some of their money back from the private money manager, which raised $1.7 billion starting in 2013 and invested primarily in auto dealerships and trash hauling businesses. GPB private placements were sold by financial advisors registered with dozens of broker-dealers.
The US Court of Appeals, Second Circuit, ruled on behalf of the Securities and Exchange Commission yesterday in a dispute with Gentile, affirming that GPB should be a receivership. Gentile had earlier appealed the district court’s decision from last year, essentially slowing down the process by which GPB would be run by a receiver.
“We conclude that the district court did not abuse its discretion in converting the monitorship into a receivership,” a court filing read. “Accordingly, we affirm the district court’s orders and vacate the stay.”
“This is progress for GPB investors and their financial advisors, and that’s important, but it’s still unclear when investors get their money back,” said one senior brokerage executive, who spoke privately to InvestmentNews about the matter. “Investors were sold a product that was misrepresented. It’s been a half dozen years since this came to light. How long should it take to clean up GPB?”
GPB Capital has a troubling history and has been dead in the water since 2018. Investors and financial advisors have seen no distributions, akin to dividends, from the private placements for several years as the company’s senior executives fought to defeat fraud charges.
The firm had more than a half-dozen funds and targeted a steady 8 percent annual return to investors. Led by Gentile and broker-dealer chief Jeff 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 SEC.
In February 2019, the FBI raided GPB offices in Manhattan.
In 2021, the Department of Justice, along with the SEC, charged Gentile, Schneider and another senior executive, Jeffrey Lash, with a number of fraud charges, including creating a Ponzi-like scheme and securities fraud, wire fraud, and conspiracy.
But Gentile and Jeffry Schneider were found guilty on all fraud counts they face at the start of August by a 12-person jury after a seven-week trial in federal court in downtown Brooklyn.
Federal prosecutors charged that Gentile and Schneider used phony, back-dated documents and paid distributions, or dividends, to investors using their own money, rather than admitting that the performance of GPB funds was not as steady as it appeared.
Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.
Markets have always been unpredictable. What has changed is the amount of information investors are trying to process and the growing role advisors play in helping clients avoid emotional decisions
Six apartment deals, one "big account," and $2.7M in undocumented insider loans. Now the lawsuit lands
The Illinois order refers to Brandon Ellington’s investment program as a “Ponzi-like scheme.”
But the Amazon executive chair seems to want it both ways, arguing that taxing the ultra-wealthy won't help struggling Americans.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
