In recent years, GPB Capital has come under intense scrutiny from investors, government regulators, and the media. GPB Capital is a private equity firm based in New York that was founded in 2013 and has been accused of running a Ponzi scheme as well as being involved in several lawsuits. GPB Capital makes investments in middle-market companies.
It has raised $1.8 billion in capital, including $650 million from retail investors. As a result of its high fees, lack of transparency, and questionable investment practices, GPB Capital has received widespread criticism. GPB Capital was investigated by the SEC in December 2018. In addition to being investigated, GPB Capital is also being sued by investors who claim they were misled about its risks. GPB Capital denies any wrongdoing. The troubles of the firm have cast a shadow over the entire private equity sector.
GPB Capital has seen a massive drop in its AUM in recent months. In June, the company reported that AUM had decreased 45.2% from the end of 2017. The company has since announced that it will have a plan to raise more capital. However, there are many concerns surrounding the fund, including its lack of transparency and unaudited financial statements.
Investing In Non-Traditional Investments
Investing in non-traditional investments can be a dangerous proposition. The risks are high, and the rewards are less certain. Investors should consider the risks before making any investment decisions. Many investors are unsuitable for private placement investments, which are often illiquid and involve high risk. Investing in these types of investments may not be worth the money, but they are still a viable option for some investors.
GPB Capital is a private equity fund based in New Jersey. It is a registered investment advisor with the SEC. It is also affiliated with Ascendant Alternative Strategies, LLC, a Texas-based securities marketing firm. The firm’s principals are David Gentile, Jeffry Schneider, and Jeffrey Lash.
The firm is under investigation by federal agencies and has been accused of running a Ponzi scheme. It has failed to disclose financial information about some of its biggest funds, and it has ceased paying out distributions to investors. At this time, it is unclear whether the company will survive. Many investors have filed lawsuits against the brokerage firms and broker-dealers who advised them to invest in GPB, seeking to recover their losses.
Unaudited Financial Statements
Despite recent revenue and income growth, GPB Capital Holdings failed to file audited financial statements for two of its funds. These funds, the GPB Automotive Portfolio and GPB Holdings II, raised more than $645 million from investors. Despite the company’s delay, GPB is still expected to file audited financial statements by the end of the year.
The complaint alleges that GPB Capital falsified its financial statements to avoid regulatory scrutiny. The company also failed to disclose delays in filings. The unaudited financial statements also contradict the company’s claims that it is transparent about its operations. While the Massachusetts Complaint does not mention GPB’s financials, the allegations of a fraudulent scheme against the company are serious. GPB is not alone. Separate lawsuits have been filed in other states.
Although GPB denies it is part of a fraudulent scheme, investors have waited more than a year to receive audited financial statements. The company has repeatedly denied the allegations of investors’ losses and has halted redemptions. It also has prohibited investors from liquidating their GPB investments or selling them on the secondary market. Furthermore, GPB Capital has missed multiple deadlines to file audited financial statements. Its actions have resulted in multiple FINRA arbitration claims and several class action lawsuits.
The FBI visited the offices of GPB Capital in February 2019 as part of an investigation into a Ponzi-like investment scheme in the United States. The firm is accused of defrauding investors of at least $2 billion. The company allegedly used the money of investors to fund payments to other investors and to prop up auto dealerships. The company has also been accused of missing filing deadlines.
The FBI and FINRA have both begun investigations into the alleged Ponzi-like investment scheme run by GPB Capital. It is believed that up to 17,000 retail investors nationwide were defrauded through the fraudulent scheme. However, the SEC has placed the investigation on hold pending the outcome of criminal fraud cases against Gentile.
The SEC’s investigation of GPB Capital has revealed several serious problems. The company failed to disclose its financial condition, and executives misrepresented the sources of funds to investors. Moreover, the company failed to provide audited financial statements for two funds. Further, it violated whistleblower protection laws and retaliated against whistleblowers.
Issues With Due Diligence
A growing body of litigation has focused on the failure of GPB Capital to provide investors with reasonable due diligence prior to selling them its private placement offerings. Specifically, investors who invested in the company’s funds were rewarded with high commissions, which should have been an obvious red flag. Brokerage firms reportedly failed to do their due diligence, and their compliance departments likely overlooked numerous red flags.
GPB Capital Holdings was founded in 2013 by David Gentile. The company purportedly invested in waste management and automobile dealership businesses, but its investors experienced large losses and a collapse in portfolio values. As a result, GPB Capital is currently under investigation by the Securities and Exchange Commission, Massachusetts Securities and Financial Regulatory Authority, and the Federal Bureau of Investigation.
GPB Capital has halted raising money, changed its auditor, and decreased distributions, all of which are warning signs of problems. The firm is currently under multiple regulatory investigations, and investors should be wary of any investment company that has a disclaimed audit report.