DJ GPB Capital Faces Claims Over 'Ponzi-Like Scheme' Involving $1.7 Billion
GPB Capital Holdings LLC and three men tied to the private-equity firm face charges from federal and state authorities that they used phony financial statements to deceive thousands of investors, many of them elders, in what is described as a $1.7 billion "Ponzi-like" arrangement.
The New York firm and David Gentile, its owner and chief executive, face civil complaints from the Securities and Exchange Commission and the New York Attorney General, including that they defrauded more than 17,000 investors across the country.
The state is seeking restitution of more than $700 million to investors and a permanent injunction against Mr. Gentile and others from selling securities in New York.
GPB also faces charges involving retaliation against a whistleblower who alerted the SEC to what was going on at the firm.
A spokeswoman for GPB didn't have an immediate comment and a lawyer who has represented the firm didn't immediately respond to a request for comment. The firm has denied previous fraud allegations in Massachusetts.
New York Attorney General Letitia James charged GPB with violating the state's Martin Act, the statute used to police securities firms and banks by then-Attorney General Eliot Spitzer during the dot-com bubble around the turn of the century.
Ms. James said GPB and a related marketing company, Ascendant Capital LLC, and its owner, Jeffry Schneider, and Jeffrey Lash, a former GPB managing partner, "fleeced" more than 1,400 New Yorkers who had invested more than $150 million in the firm's private-equity funds. She said the funds never delivered promised profits and that the defendants instead used the investments to subsidize "their own lavish lifestyles."
GPB used its funds to acquire auto dealerships, mainly in the Northeast, and to invest in waste-management companies, she said.
At the SEC, Richard Best, the director of the agency's New York office, said GPB and Austin, Texas-based Ascendant told new investors to expect 8% dividends from their portfolio profits when many of those payments came from investors' cash.
Ms. James said separate actions against GPB and other defendants are being taken in Alabama, Georgia, Illinois, Missouri, New Jersey and South Carolina. GPB already faces a civil action over similar allegations in Massachusetts, where Secretary of State William Galvin has referred to the firm's operations as a Ponzi scheme.
GPB also faces several federal class-action lawsuits in which plaintiffs have accused the firm of running a Ponzi scheme that used fresh investor capital to pay dividends to earlier investors.
Last month, a Financial Industry Regulatory Authority arbitration panel in Detroit ruled in favor of an investor who claimed that a $225,000 investment in a GPB automotive fund had been misused, documents show. Brian Levin, a Levin Law PA lawyer in Miami who represented the investor, said in an email it was the first arbitration that went to a final decision involving a GPB product.
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(END) Dow Jones Newswires
February 04, 2021 14:04 ET (19:04 GMT)
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