Key GPB Capital Parties Accused of Making $40M in Ponzi Scam

States Allege Self-Dealing: Key GPB Capital Parties Used Investors’ Money to Fund Luxury Expenses

In separate lawsuits suing GPB Capital Holdings and other key parties for defrauding investors in a more than $1.8B Ponzi scam, Missouri and Illinois regulators are accusing former GPB Capital Holdings CEO, David Gentile, and Ascendant Capital owner, Jeffry Schneider, of illicitly collecting over $40M from the alternative asset firm’s operations.

The two men, along with ex-GPB Managing Partner, Jeffrey Lash, were recently arrested in a related federal criminal case that was brought parallel to the US Securities and Exchange Commission (SEC)’s own civil lawsuit. GPB Capital Holdings is an alternative asset firm that is accused of operating like a Ponzi scam that defrauded over 17,000 investors.

Several state lawsuits have since followed, including those from Missouri and Illinois. The two state regulators contend that Schneider, who owns the now non-operational Ascendant Capital, illicitly made at least $13M from his involvement with GPB Capital, the GPB funds, and Gentile, while the latter illicitly garnered over $27M. Schneider is also an ex-Axiom Capital Markets broker.

Illinois and Missouri regulators are accusing Gentile, Schneider, and Lash of self-dealing, modifying financial statements, and using investors’ money to pay for luxury items, including a $355K Ferrari for Gentile. Another car that he bought was purportedly never listed under his name and instead ended up as a $183K loss for one of the auto dealerships that Lash owned.

Fake Payments, Special Distributions as Incentives Alleged

GPB Capital invests in auto dealerships and waste management. Its allegedly fraudulent activities appear to have primarily involved four of the GPB funds:

GPB Holdings, LP
GPB Holdings II, LP
GPB Waste Management LP
GPB Automotive Portfolio, LP

According to all of the state lawsuits, in the GPB Ponzi scam, new investors’ money was used to pay earlier investors their promised 8% dividends.

Many of these investors were purportedly aged 60 or older – typically not the most suitable age group for alternative investments. Ongoing monthly distributions that were supposed to come from profits made instead allegedly came from investor capital. Distributions were suspended in late 2018.

The Illinois lawsuit is accusing GPB Capital Holdings and Ascendant of creating “special distributions” as an incentive for investors. These were to only be paid to those that invested in the GPB funds by a specific deadline. Ascendant promoted the distributions and deadlines. The state regulator accused both companies of taking advantage of investors’ demand for yield during a lengthy time of low-interest rates.

The GPB executives are accused of generating fictitious paper transactions. This allegedly included “performance guarantees,” which were fake payments that were attributed to car dealerships and backdated to conceal that fund accounts were losing money. According to the Illinois complaint, from 2014 to 2018 over $100M in bogus payments were made.

The Illinois regulator states that at least 20 registered brokerage firms and 65 brokers sold 750 GPB investments for more than $50M. The Missouri fraud case contends that 14 broker-dealers sold investments in four of the GPB funds to 255 investors, 69% of whom were older than age 60. Meanwhile, the firms that sold them to investors in the state earned over $1.5M in commissions.

Experienced GPB Investment Fraud Lawyers

Dozens of brokerage firms collectively made more than $160M in commissions from selling GPB investments to customers. Our securities fraud attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) are fighting for these investors. Already, we have filed a number of GPB private placement fraud claims in FINRA arbitration on their behalf.

Call SSEK Law Firm at (800) 259-9010 today. We work with investors throughout the US.