Investor Files GPB Private Placement Claim Against Kalos Capital

A Tennessee investor is pursuing a Financial Industry Regulatory Authority (FINRA) arbitration claim against Kalos Capital, Inc. and its broker Martin Hunter McFarlin for the more than $100K in losses that he sustained from investing in non-traded real estate investment trusts (non-traded REITs) and the GPB Capital Automotive Portfolio. Now, the claimant is alleging omissions, misrepresentations, gross lack of supervision, unsuitable recommendations, and due diligence failures. Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) is representing this individual in his case against Kalos and McFarlin.

Our client is a divorced dad, a small business owner, and an unsophisticated investor, which is why he turned to McFarlin and Kalos several years ago to help him invest his retirement money for him and his family. During seminars and company Christmas parties, the claimant was told that private placements were safe alternative investments.

Private Placements Are Risky Investments
The reality, however, is that private placements, like non-traded REITs, are generally illiquid and typically very high risk. They are certainly not for conservative or inexperienced investors. Still, McFarlin went on to invest over $300K of our client’s savings in non-traded REITs and private placements, including the $50K in the GPB Automotive Portfolio fund after he was told to expect a liquidity event that would increase his money. Initially, McFarlin had tried to get him to invest $100K in the GPB fund.

The claimant was promised an 8% return for investing in the GPB Automotive Portfolio fund. Unfortunately, his investment in the GPB fund is now “essentially worthless” and GPB Capital Holdings, the alternative asset firm that operates all GPB funds, has since been accused of running a $1.5B Ponzi scam by at least two former business partners. Not only that, but a number of the other investments that our client made at the behest of the Kalos broker, some of which he has held for several years, have since lost value.

SSEK Law Firm believes that our client was sold these investments so that Kalos and McFarlin could earn commissions and not because they were suitable for him.

Brokers Made Millions from GPB Sales
As a matter of fact, brokerage firms and their brokers that sold $1.8B of GPB private placements to clients have reportedly made over $167M in commissions, even as investors lost money–some of them up to 75% of what they invested. For the thousands of investors who thought they were investing in safe and low risk investments, this has come as a devasting shock.

Meantime, FINRA, the US Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI) ,  and  different state agencies are investigating GPB Capital and its numerous funds, while the alternative asset firm continues to be remiss in filing its required financial statements with regulators and investors. Last week, GPB Capital notified brokerage firms and investors that it once again would not be making its latest deadline for submitting audited financial statements that were due at the end of the month. Instead, they could “expect” this information by year’s end. GPB cited “new challenges” for this latest delay.

GPB Private Placement Lawyers
SSEK Law Firm represents clients who were sold GPB private placements, suffering financial losses a result. This is not our first investor claim against Kalos or other brokerage firms for selling GPB investments to customers. If McFarlin or another Kalos broker sold you one of these private placements, please contact our GPB investment attorneys to schedule your free, no obligation case consultation.