GPB Capital… Scam? Fraud? Ponzi Scheme? All of the Above???
Google the phrases “GPB Capital scam” or “GPB Capital fraud” and you will find dozens of posts. Lawyers everywhere are warning people to seek legal representation but most investors continue to sit on the sidelines and wait. In this post we will answer all your questions and hopefully convince you that the warnings are accurate and how to claim a refund for any losses.
GPB Capital – What Is It?
GPB Capital claims it is a “New York based alternative asset management firm that seeks to acquire income producing companies.” It is run by its founder (and CEO), David Gentile. Since 1983, the company raised approximately $1.8 billion from thousands of investors.
The money was raised through a series of private placements. The actual investments went into a series of funds including:
- GPB Automotive Portfolio LP,
- GPB Cold Storage LP,
- GPB Eurobond Finance PLC,
- GPB Holdings II LP,
- GPB Holdings III LP,
- GPB Holdings Qualified LP,
- GPB Holdings LP,
- GPB NYC Development LP,
- GPB Scientific LLC, and
- GPB Waste Management LP, (formerly GPB Waste Management Fund LP).
Is GBP Capital in Trouble?
The answer is yes! Let’s look at what we know:
First, the company has routinely failed to make required securities filings on some of its funds including GPB Holdings II ($646 million) and GPB Automotive Portfolio ($622 million). In some instances, they have missed years of filing deadlines.
Second, the company’s auditor, Crowe LLP resigned. That’s a big deal. The auditor reportedly resigned because of reported irregularities and undisclosed third party transactions.
Not enough? The FBI, SEC, the Financial Industry Regulatory Authority (FINRA), New York and Massachusetts all have pending investigations.
In June, 2019 GPB announced significant losses in two of its funds. GPB Holdings II lost one quarter of its value and the GPB Automotive Portfolio dropped by 39%. Other GBP funds dropped by as much as 73%.
There is more, a former GPB Holdings partner claims the company is a Ponzi scheme. (That’s our opinion too.) He says, the “losses occasioned by GPB were in fact caused by a very complicated and manipulative Ponzi scheme… GPB paid its investors significant returns based upon falsified financial information.”
If you think things couldn’t get worse, they did. On October 23rd, the Justice Department indicted the GPB Capital’s chief compliance officer, Michael Cohn, with obstruction of justice. He is also charged with unauthorized computer access and unauthorized disclosure of confidential information. Those charges relate to Cohn’s time with the SEC.
GPB apparently made an offer Cohn couldn’t refuse. Prosecutors allege that he specifically left the SEC to take the compliance position at the company. It goes without saying that legitimate companies don’t hire corrupt government officials and pay them to steal information about pending audits. (The indictment says Cohn told GPB that he had inside information on the investigation.)
Add it all up and we doubt the funds have any value. We personally think GPB Capital is a billion dollar Ponzi scheme about to collapse. The only reason it hasn’t happened is because the company and the brokers that sold this mess keep telling investors to hold on.
Why the brokers? Because they made huge commissions on these worthless investments and don’t want to get sued.
If – or as we believe, “when”, GPB goes under, it’s the brokers who are left holding the bag. But wait too long and you may not get a dime. The brokers that sold these GPB funds don’t have $1.8 billion. The sooner you act, the better your chances of recovery.
The company has also been trying to pacify investors. In March, GPB told investors it was cooperating with regulators and working to strengthen its finances. Since then it has sent three more letters but still no financial reporting and no rational explanations for what is happening.
People that have invested their life savings want to believe everything is okay. Things are not okay. And investors should contact us and starting the process to get back their money… while they still can.
Brokerage Firms that Sold GPB Capital
Because the GPB funds are set up as private placements, they aren’t registered securities and are therefore not suitable for most investors. As we said earlier, we think GPB Capital is a scam. Even if it was legitimate, these types of investments are quite risky.
Brokers like them because they paid high commissions. With many brokerage firms today offering trades at less than 1% commission, the brokers that sold GPB made as much as 7% or 8%. New evidence suggests that brokers made $167 million in commissions suggesting commissions in excess of 9%!
Industry rules require brokers to know their customers (KYC rules) and to only make suitable recommendations. Unfortunately, many brokers forgot that lesson and made recommendations that were in their own best interests (commissions).
Because these investments were private placements, they can only be sold to accredited investors. We believe that some brokers cut corners and sold to any investor with a checkbook. Once again, if you don’t meet the SEC’s accredited investor test, you may be able to recover any losses.
Finally, brokerage firms have an obligation to perform due diligence on the products they are recommending to customers. That due diligence doesn’t mean simply finding the products that pay the highest commissions.
The bottom line? If your broker recommended and sold you a GPB Capital fund, you may be able to recover your losses. Even if your broker has no money, his or her employer can be held liable.
InvestmentNews claims that 60 different broker dealers were selling the company’s funds. In September 2018, the Massachusetts Securities Division said the number of brokerage firms selling the funds was 63.
We believe the following companies are or were heavily pushing GPB Capital:
- Geneos Wealth Management,
- Royal Alliance Associates Inc.,
- Sagepoint Financial Inc.,
- FSC Securities Corp.,
- Kalos Capital,
- Woodbury Financial Services Inc.,
- Arkadios Capital, and
- MSC-BD, LLC
A full list of the brokerage firms believed to have been selling GPB Automotive Portfolio, the biggest of the GPB funds, as derived from SEC public records appears at the end of this post.
How to Sue a Broker or Get Your Money Refunded
Many of the investors we speak with believe that suing a stockbroker is expensive or difficult. In the United States, investor losses are typically the subject of a mandatory arbitration agreement. Claims are heard before a panel from FINRA, the Financial Industry Regulatory Authority. The customer can seek a panel of all public members. In other words, its’s not the stockbroker’s buddies that will hear your case.
We like arbitrations because they are relatively quick. In some areas of the country, lawsuits can drag on for years. The average FINRA arbitration, however, takes just 14 months.
There are also no appeals. Unless someone can demonstrate the arbitrator was biased, if you win the arbitration the brokerage firm typically can’t appeal. When it’s done, it’s done.
While a GPB Capital case could get expensive, we handle these cases on a contingent fee basis. Expert fees, arbitration fees and travel are advanced by us. If we don’t win, you don’t pay these costs nor do you pay us for our time. In other we have skin in the game as well.
Although lawyers won’t say it on their websites, most law firms won’t take small cases. We are no exception. If the case is below $100,000 in losses, we often can’t help. There are so many GPB cases, however, that we can often take smaller cases depending on who the broker is. Why? Because of the economies of scale when we have multiple claims against the same brokerage firm.
Let’s give an example. If you and 3 other people come to us with $30,000 losses from Woodbury Financial, we can use one expert and often consolidate our discovery process. If we can’t help you, we will try to find of our competitors who may have an existing case against the same brokerage firm.
Our bottom line is seeing you made whole.
To learn more, visit our investor fraud recovery page. Ready to see if you have a claim involving GPB Capital? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. All inquiries are kept strictly confidential.
Appendix
Brokerage Firms Selling GPB Automotive Portfolio:
- Accelerated Capital Group
- Advisory Group Equity Services
- Aegis Capital Corp.
- American Capital Partners
- Arete Wealth Management
- Arkadios Capital
- Ascendant Alternative Strategies
- Ausdal Financial Partners
- Avere Financial Group
- Axiom Capital Management
- BCG Securities
- Benjamin & Jerold Brokerage
- Cabot Lodge Securities
- Calton & Associates
- Cape Securities
- Capital Investment Group
- Center Street Securities
- Coastal Equities
- Colorado Financial Service Corp.
- Concorde Investment Services
- Crown Capital Securities
- Crystal Bay Securities
- David A. Noyes & Company
- Dawson James Securities
- Dempsey Lord Smith
- DFPG Investments
- Dinosaur Financial Group
- Emerson Equity
- FSC Securities Corp.
- Geneos Wealth Management
- Great Point Capital
- Hightower Securities
- IBN Financial Services
- Innovation Partners
- International Assets Advisory
- Kalos Capital
- Kingsbury Capital
- Landolt Securities
- Lewis Financial Group
- Lowell & Company
- Madison Avenue Securities
- McDonald Partners
- McNally Financial Services Corp.
- Moloney Securities
- Money Concepts Capital Corp.
- MSC – BD
- National Securities Corp.
- Newbridge Securities Corp.
- Orchard Securities
- Pariter Securities
- Purshe Kaplan Sterling Investments
- Royal Alliance Associates
- SagePoint Financial
- Sandlapper Securities
- SCF Securities
- Sentinus Securities
- Silber Bennett Financial
- Stephen A. Kohn & Associates
- Triad Advisors
- Uhlmann Price Securities
- Vanderbilt Securities
- Vestech Securities
- Western International Securities
- Westpark Capital
- Whitehall-Parker Securities
- Windsor Street Capital
- Woodbury Financial Services
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