Last week, the Securities and Exchange Commission (“SEC”) announced charges against investment adviser GPB Capital Holdings (“GPB”) and three of its principals David Gentile, its owner and CEO, Jeffry Schneider, the owner of GPB Capital’s placement agent Ascendant Capital, and Jeffrey Lash, GPB Capital’s former managing partner. They were charged with defrauding over 17,000 retail investors in a massive Ponzi-type scheme that raised 1.7 billion dollars.
As stated in the SEC’s complaint, GPB described itself as a New York-based alternative asset management firm acting as a general partner and fund manager for limited partnership funds. The limited partnership funds invested in various businesses primarily focused on automotive retail, waste management, and healthcare. Since its founding in 2013, GPB has raised an astounding amount totaling $1.7 billion from approximately 17,000 retail investors nationwide, approximately 4,000 of whom are seniors. Nearly all of the $1.7 billion raised is still at risk.
GPB marketed its investments through Ascendant Capital and AAS, a registered broker-dealer which, in turn, promoted the investments to dozens of broker-dealers nationwide who also sold them. The complaint alleges that investors were told their 8% monthly distributions would be fully covered by profits of the portfolio’s companies, even though GPB’s executives knew about shortfalls. But, as is the case in most Ponzi schemes, the earlier investors were at least partially paid with funds from new investors. In order to carry out the scheme, the defendants allegedly falsified financial statements and created back-dated performance guarantees to show income that was not really earned. GPB was also charged with violating whistleblower protection laws by threatening to enforce a confidentiality agreement and retaliating against an individual known to be working with the SEC against GPB’s interest.
Learn to Spot Signs of a Ponzi Scheme Before You Fall Victim to One
In a traditional Ponzi scheme, the fraudster uses funds from new investors to pay the fictitious “returns” to exist investors. In reality, there is no real profit being made by investing, it is simply the money coming in from new investors that are paid to the earlier investors. Once the scammer is unable to find any more new investors, the jig is up and the scheme falls apart. When more investors need to get money back from their investments than there is money to pay out, the scam is exposed. With no new money flowing in, the investors cannot get their money out. This is the most typical way a Ponzi scheme is ultimately uncovered.
The Financial Industry Regulatory Authority (“FINRA”) has laid out 7 warning signs to alert potential investors to a potential investment scam: https://www.finra.org/sites/default/files/FINRA-Investor-Alert-Avoiding-Investment-Scams.pdf
1. Guarantees: Be suspect of anyone who guarantees that an investment will perform a certain way.
2. Unregistered products: Unregistered securities sold by unlicensed individuals are often fictitious.
3. Overly consistent returns: Investments that consistently go up—or provide remarkably steady returns regardless of market conditions—should raise suspicions.
4. Complex strategies: Avoid anyone who credits a highly complex investing technique for unusual success.
5. Missing documentation: Be wary if there is no prospectus, offering circular or stock symbol.
6. Account discrepancies: Keep an eye on your account statements to make sure account activity is consistent with your instructions, and be sure you know who holds your assets.
7. A pushy salesperson: No reputable investment professional should push you to make an immediate decision about an investment, or tell you that you must “act now.”
How You Can Avoid Becoming a Ponzi Scheme Victim
In order to avoid being the victim of a Ponzi scheme, or any investment fraud, you should follow these easy steps:
Make Sure to Check out the Seller or Broker—Always ask whether the promoter of an investment opportunity is licensed to sell you the investment—and confirm which regulator issued that license AND independently verify the answers. You can verify the identity and background of the seller or promoter with the following regulators.
BROKER OR BROKERAGE FIRM: use FINRA BrokerCheck www.finra.org/brokercheck.
INVESTMENT ADVISOR: use the SEC’s Investment Adviser Public Disclosure www.adviserinfo.sec.gov
ALL SELLERS: your state securities regulator: Contact the North American Securities Administrators Association www.nasaa.org or (202) 737-0900
CHECK OUT INVESTMENTS—Unregistered investments magnify risk because often they offer little or no publicly available information. To check if a product is registered use the SEC’s EDGAR database or contact your state securities regulator. www.sec.gov/edgar.shtml
These tools will help you do research on the broker and investment to make certain that the seller and the product are legitimate and not fraudulent.
Make Sure to Review Your Investments for Ponzi Scheme Signs
When the stock market is at an all-time are high, this can mask a Ponzi scheme. Generally, in times of economic turmoil or when markets are falling, this is when investors seek to access cash. For investments that you already have, be suspicious if you have problems getting paid or if you are pressured to rollover your investments. Ponzi scheme promoters sometimes try to prevent investors from cashing out by offering even higher returns for staying invested.
Have you lost money in a GPB Capital?
CONTACT US TODAY FOR A FREE CONSULTATION
If you or a loved one have suffered investment losses as a result of an investment in a GPB Capital or any other type of investment fraud or broker negligence, contact the offices of Investment Fraud lawyer Melanie Cherdack for a free consultation. Because she has been in the trenches as a former Wall Street attorney, Melanie Cherdack and her team of experienced attorneys have seen just about every type of investment fraud or investment scam. While almost every investment carries a degree of uncertainty and risk, you may have been unnecessarily exposed to such risk. Former Wall Street
securities attorney Melanie S. Cherdack and her team of lawyers represent individual and institutional investors who are unwitting victims of investment fraud and broker negligence. She heads up a group of attorneys who represent investors across the United States. Contact us by filling out our online contact form, or calling 888-768-2499 or 305-349-2336.