Massachusetts Sues GPB Capital Holdings For Defrauding Investors

State Securities Regulator Claims GPB Capital Defrauded 180 Local Investors

Massachusetts Secretary of the Commonwealth, William Galvin, has filed a civil fraud lawsuit against GPB Capital Holdings accusing it of defrauding 180 local investors who purchased more than $14M of private placements in five of the GPB funds.

The alternative asset firm, which acquires waste management operations and auto dealerships, has been accused of operating a more than $1.5B Ponzi scam.

GPB Accused of Misrepresentations & Omissions, Profiting Behind Investors’ Backs

Galvin’s complaint accuses GPB Capital of, in Ponzi-like fashion, using investor funds to pay investor distributions, even though marketing collateral including private placement memoranda, said payments would come from operational profits and a nearly 8% monthly distribution.

Instead, investment distributions were suspended in late 2018 and all of the GPB funds have plunged significantly in value since then.

Meanwhile, investors have been unable to access their funds and, having received no audited financial statements in years, they have no idea if their private placements are still worth anything at all.

Here are the GPB Funds in which Massachusetts investors made investments:

GPB Holdings
GPB Holdings II
GPB Automotive
GPB NYC Development
GPB Waste Management, LP

According to the Massachusetts regulator, even as some GPB funds’ financial statements began to show that distributions had started to exceed net incomes, disclosure and marketing materials were never modified to indicate this.

Businesses Related To The Alternative Asset Firm Also Received Payments

Also, without investors’ knowledge, businesses related to GPB were receiving payments–payments that benefited senior GPB executives, as well as the family of GPB founder, David Gentile.

For example, there is the brokerage firm Ascendant Alternative Strategies, which Gentile and GPB strategic adviser, Jeffrey Schneider, own. The alternative asset firm paid the broker-dealer and its branch Ascendant Capital millions of dollars related to the marketing of the GPB funds and acquisitions made by the alternative asset firm.

Galvin’s office contends that Ascendant Capital and GPB Capital Holdings are, in fact, the same entity even though they present themselves as separate and that these ties have not been properly disclosed. GPB denies Galvin’s allegations.

The alternative asset firm remains under investigation by FINRA, the US Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI) and others.

It is also the subject of numerous class action securities lawsuits and is even being sued by two former business partners. One of these is ex-Prime CEO, David Rosenberg, whose family grew that company into one of the biggest dealership groups in New England before selling controlling interest to GPB.

Rosenberg was fired by GPB last year. A number of auto dealerships have protested his ousting, including, most recently, Toyota, which is now demanding that GPB Capital Holdings sell its Prime Toyota dealerships.

GPB Investment Fraud Lawyers

Already, many investors have filed Financial Industry Regulatory Authority (FINRA) arbitration claims against the 60 brokerage firms that, along with their brokers, earned over $160M in commissions from the GPB private placement sales. More GPB investor fraud complaints are expected as investors fight to recover their losses.

At Shepherd Smith Edwards and Kantas (SSEK Law Firm), our broker fraud lawyers have spent the past year filing many of these GPB fraud claims on investors’ behalf against a number of firms, including Triad Advisors, Ameriprise, Kalos Capital, Pruco Securities, International Assets Advisory, Arkadios Capital, and others.

SSEK Law Firm has 30 years of experience going up against the largest firms on Wall Street and we have recovered many millions of dollars on our clients’ behalf. Contact us today so that we can help you explore your legal options during your free, no-obligation, case consultation.