Another Ponzi – $1.7 billion and 17,000 investors

The has just charged GPB and its three managers of running a complex $1.7 bn ponzi scheme, which defrauded 17,000 investors, 4,000 of them seniors. The managers, David Gentile, Jeffrey Lash and Jeffry Schneider, were living large – properties, luxury travels, trips, planes and Ferraris, transfers to personal bank accounts…

GPB Capital is a New York-based alternative firm founded in 2013, which focuses on acquiring private companies in various industries, including the waste management and the automotive retail sectors. It has raised more than $1.8 billion in investor equity through various private placement offerings.

Many red flags

The case has many red flags, and the story went from rumors into a free fall:

  • Promises of consistent and high returns, described as ‘income products’.
  • Returns, which turn out to be uncorrelated to market fluctuations.
  • Aggressive marketing strategies, with large commissions ($165m) paid to capital raisers – up to 11.75% commissions, of which 7% to 9% went to the recommending brokers (63 of them, including Royal Alliance Associates, Sagepoint, FSC Securities, Woodbury Financial Services…).
  • Continued capital raising, which continued, despite the firm’s difficulties in deploying the capital.
  • Phone calls and emails from investors never answered.
  • Suddenly interrupted capital raising (2018),
  • Decreased distributions, after the firm stopped raising capital.
  • The resignation of an auditor (November 2018), missed financial statement filing even after a year of delay (April 2019), disclaimed auditor reports,
  • between partners, one accusing the others of running a complex Ponzi.
  • Investigations by New York’s AG (Summer 2018).
  • The clearing firm National Financial service, withdrawing GBP from its platform, declaring it has “no clear value”.
  • Litigations started against the firm in mid 2019, alleging misconduct going back to 2014: one, two, three, four, five
  • Prosecution by authorities, of which Massachusetts’ AG (May 2020) , SEC and the FBI (March 2019).
  • GPB’s investments suddenly losing in value (up to 73% in value)
  • Indictment of the Chief Compliance Officer, Michael Cohn (October 2019). Mr. Cohn left the SEC’s team investigating GBP, to join GBP!
  • The arrest of the CEO, David gentile, who faces 20 years in prison (Madoff got 150 years).
  • Allegations of threats and retaliations against a .
  • The New York attorney General is now also suing GPB and its three managers for defrauding its investors by $700 m.
  • Numerous states, from Alabama to New Jersey, are now following suit.

According to the latest from ADV (June 2019), the firm claimed to manage only $239m… despite raising $1.8 bn.

Ponzi’s are definitely not a thing of the past…

 

Credits

Credits to Bruce Kelly at Investment News for many well researched , of which:

 

And to Jonathan Stempel at Reuters:

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Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.

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