Executives of GPB Capital Arrested for Allegedly Orchestrating $1.8 Billion Ponzi Scheme

GPB Capital Holdings CEO David Gentile, managing partner Jeffrey Lash, and private placement broker Jeffry Schneider are facing up to twenty years in prison regarding their role in an alleged Ponzi scheme. Allegedly, GPB Capital raised $1.7 billion from investors by promising 8% annualized distribution payments. The SEC alleges that payments that investors received relied on funds from other investors, instead of money generated by GPB Capital. Meanwhile, various states allege that the executive staff pocketed millions of dollars for themselves.

In 2019, the FBI raided GPB Capital Holding’s Manhattan headquarters and the funds stopped paying distributions shortly thereafter. Over the last two years, investors were continuously assured that everything was “OK” and that GPB would imminently issue audited financials. Sadly, as investors have now learned, GPB was far from OK.

GPB Capital Investigation: How Did the Scheme Work?

According to the February 2021 SEC complaint, GPB Capital’s scheme lasted several years because of the concerted efforts of its principals, who deliberately concealed their conduct from investors. For instance, the SEC alleges investors did not receive audited financial statements as they should have. GPB Capital also did not register two of its funds with the SEC. By not registering, GPB never had to turn over financial documents to the regulator.

Jeffry Schneider: Lengthy Record of Regulatory Actions and Investor Disputes

Jeffry Schneider owns Ascendant Capital, the placement agent for GPB Capital. Placement agents help companies find investors for their private placements — the high-risk securities that allow companies to raise money without registering with the SEC. Schneider is also a registered broker and formerly registered investment adviser. He has 13 investor disputes on his FINRA record as well as a recent regulatory action from the State of New Jersey.

GPB Capital SEC Investigation: Broker-Dealers Allegedly Paid to Recommend Fraudulent Securities

To keep the source of the distribution payouts hidden from investors, Jeffrey Lash allegedly manipulated statements of limited partnership funds to make it look like the GPB Capital’s various portfolio companies could cover the distribution payments.

GPB Capital raised money using a network of approximately 60 broker-dealers. These broker-dealers sold private placements for funds including GPB Holdings, GPB Automotive, and GPB Waste Management. According to the SEC GPB Capital investigation, these broker-dealers received approximately $187 million in selling fees. BrokerCheck, the broker-dealer conduct record maintained by FINRA, is littered with investor complaints regarding GPB investments.

Brokers may have ignored the red flags surrounding GPB Capital. Securities attorneys argue that investors should be able to recover their losses, especially if their broker had a monetary incentive to recommend these fraudulent securities.

GPB Capital: Retaliation Against Whistleblowers

GPB Capital allegedly included language in its termination agreements that made former employees believe they could not contact the SEC with concerns about the company’s handling of investor money. This language goes against the SEC’s whistleblower protections.

The SEC further alleges that GPB Capital retaliated against a known whistleblower. This whistleblower had served as a compliance officer at GPB and knew firsthand that the company misused investor funds. During his employment, the SEC alleges that this employee raised concerns about misuse of investor funds to an auditor, which GBP Capital counsel allegedly told him was improper.

The GPB Capital Chief Compliance Officer allegedly warned David Gentile not to fire the whistleblower, stating, “To the extent that [the whistleblower] revealed information to auditors . . . that was confidential but otherwise truthful . . . I think this would be an important deterrent in moving forward with a plan to terminate him as it would be viewed as Retaliatory by [the SEC].” Nevertheless, GPB Capital terminated the employee just three days later.

Did Your Broker Ignore Red Flags?

If your investor ignored red flags about GPB Capital, you should seek to recover your losses. Don’t hesitate to contact a securities attorney with your concerns. Call (877) 238–4175 or email info@fkesq.com for a free case evaluation.