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Written by 7:20 am Blog, Investment Loss Recovery

GPB Capital Holdings Lawsuits

GPB Capital Holdings Lawsuits, featured by Top Securities Fraud Attorneys, The White Law Group

GPB Capital Holdings Shareholders may have Claims 

New York private equity firm GPB Capital Holdings, facing civil fraud allegations since 2021, will finally be liquidated by a court-appointed receiver, according to a litigation release. The U.S. District Court for the Eastern District of New York has agreed to the SEC’s request to convert the ongoing monitorship over GPB Capital Holdings LLC and numerous affiliated entities into a receivership.

In February 2021, the CEO of GPB Capital Holdings, along with two others, were accused of running what’s described as a massive Ponzi-like scheme, that allegedly scammed 17,000 investors across the U.S. out of over $1.7 billion, as per the U.S. Attorney’s Office for the Eastern District of New York.

Fraud Charges

The three executives, including the founder and CEO of GPB Capital, the CEO of GPB’s placement agent Ascendant Capital, and a former managing partner of GPB, were facing charges related to fraud, wire fraud, and conspiracy.

On the same day, the Securities and Exchange Commission (SEC) and seven state regulators made similar charges. The SEC also accused GPB Capital of violating whistleblower protection laws.

The SEC’s complaint claims that the CEO of GPB Capital, and the owner of GPB Capital’s placement agent Ascendant Capital, misled investors about where the money came from for an 8% yearly payment to investors.

Falsified Financials

They allegedly falsified financial statements to boost the income of the limited partnership funds, making it seem like there was enough money to cover the payments to investors.

Despite knowing about the shortfalls, they reportedly assured investors that the 8% monthly payments would be fully covered by profits from the companies in the portfolio. However, it seems that at least some of the investors were paid using money from new investors.

The SEC claims this scheme went on for more than four years because GPB managed to keep the funds’ financial condition hidden from investors. They failed to provide audited financial statements and didn’t register two of their funds with the SEC.

GPB Capital Holdings – Timeline of Events

On February 12, 2021, the Court appointed a monitor to oversee GPB Capital.  On June 13, 2022, the SEC moved to convert the monitorship into a receivership because of GPB’s alleged breach of the monitor order.  Pursuant to the terms of the order, within 45 days, the receiver shall provide the Court with an accounting of receivership assets and propose a plan to distribute assets to investors.

It’s been a long road for GPB Capital investors, beginning in 2018 when William Galvin and the Massachusetts Securities Division launched an investigation into the “sale practices” of 63 Broker Dealers who were selling the GPB capital private placements.

February 2020 – GPB Delays K1s for Shareholders

The company reportedly notified investors of its GPB Automotive Portfolio fund that it won’t be delivering key tax documents, such as the Schedule K-1, to them in time for this year’s April 15th tax deadline.

July 2019 – Partner files Suit Claiming “Ponzi Scheme” 

Prime Automotive Group CEO David Rosenberg reportedly filed a lawsuit in Massachusetts alleging his business partner, GPB Capital, is running a Ponzi scheme by using new investment money to pay returns to existing investors, according to an article in the Portland Press Herald.

June 2019 – Significant Losses

The company today reported significant losses in the value of the same two investment funds, GPB Holdings II and GPB Automotive Portfolio, which have seen declines in value, respectively, of 25.4% and 39%.

Rosenberg reportedly filed the lawsuit in Norfolk Superior Court, after GPB Capital allegedly failed to pay Rosenberg $5.9 million on July 1 as part of a partnership buyout reportedly involving dozens of auto dealerships.

May 2019  – GPB Capital Holdings Delays Filing Financials

GPB Capital Holdings has shown no signs of filing financials a year after stating its intention to take a break from raising money while it straightens out the accounting and financial statements of two of its existing funds.

Dealing with proper accounting standards was allegedly the reason for the delay last year. What’s the hold up now? According to Investment News, “The company won’t say, but keep in mind that GPB’s CEO and lead partner, David Gentile, is a CPA. That means even the accountant isn’t doing the accounting at GPB.”

August 2018 – Company Suspends Distributions and Halts Sales

The trouble apparently began when GPB Capital Holdings announced the decision to stop raising new money, and suspended redemptions so that they could reportedly focus on straightening up their financial reporting on two of their funds, GPB Holdings II and GPB Automotive Portfolio.

Investigating Potential Claims involving GPB Capital Holdings

According to one report, while investors are suffering great losses, financial advisors and brokerage firms have earned more than $160M in commissions, including $52.5M from the GPB Automotive Portfolio.

The White Law Group has represented numerous investors in claims against their brokerage firms in connections with their investments in risky GPB Capital offerings, including the following:

Armada Waste Management LP (f/k/a GPB Waste Management LP) GPB Holdings II GPB Holdings I GPB Automotive Portfolio GPB Cold Storage GPB NYC Development GPB Holdings Qualified LP GPB Holdings Automotive LLC

Private Placement investments such as GPB offerings are highly complex, high-risk investments. They are only suitable for sophisticated, accredited investors and institutions.

Unfortunately, brokers may not always adequately explain the risks and liquidity problems involved with purchasing units in a limited partnership or limited liability company. These investments are often considerably more risky than traditional investments such as stocks, bonds, or mutual funds just because of lessor oversight by regulators. They also typically come with high fees and commissions.

Due Diligence

Broker dealers are required to perform adequate due diligence on all investment recommendations they make. They must ensure that each investment is suitable for the investor considering the investor’s age, risk tolerance, net worth, financial needs, and investment experience.

If a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment, they may be liable for investment losses through FINRA arbitration.

Class Action vs. Individual FINRA Arbitration Lawsuit 

People often wonder whether a large class action lawsuit is a better litigation option for them than an individual FINRA arbitration case.  The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option.  Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually. 

Hiring a Securities Attorney

If you have suffered losses investing in a GPB Capital Holdings offering at the advice of your financial advisor, the securities attorneys at The White Law Group may be able to help you. Please call the offices for a free consultation at 1-888-637-5510. 

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.

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