$1.7 billion Ponzi scheme defrauded 17,000 investors, SEC says

“(CNN Business) — The US Securities and Exchange Commission charged investment adviser GPB Capital Holdings and three executives on Thursday with defrauding over 17,000 retail investors in a Ponzi-like scheme that raised over $1.7 billion.

The lawsuit alleges that David Gentile, owner and CEO, Jeffry Schneider, owner of GPB Capital’s placement agent Ascendant Capital, and Jeffrey Lash, GPB Capital’s former managing partner, used investors’ own funds to pay out monthly distributions to investors instead of putting them toward customers’ investments. GBP Capital was also charged with violating whistleblower protection laws.

The investors were told their 8% monthly distributions would be fully covered by profits of the portfolio’s companies, despite the executives knowing about its shortfalls. But in reality, the investors were at least partially paid with funds from new investors.

The defendants allegedly falsified financial statements and created back-dated performance guarantees to show an income that did not exist.

GPB claims it has acted in good faith while managing investors’ funds.

“GPB denies these allegations and intends to vigorously defend itself in court where, for the first time, the firm will be able to present significant evidence in its favor,” the company said in a statement to CNN Business.

New York state also filed a lawsuit against GPB on Thursday.

New York Attorney General Letitia James also filed a lawsuit against GPB Capital and the three executives for defrauding investors out of more than $700 million. Over 1,400 New Yorkers invested more than $150 million on promises for generous monthly distributions.

“We won’t let Wall Street fat cats get away with breaking the rules, as they pilfer New Yorker’s wallets in the meantime,” James said in a statement.

The complaint also charged the defendants with misappropriating funds. Investor funds were spent on subsidizing private planes, luxury travel and millions of dollars funneled into personal and family bank accounts, New York AG alleges. The lawsuit alleges Gentile even bought a Ferrari with investor funds.

Along with the Office for the Eastern District of New York and SEC, numerous states from Alabama to New Jersey also filed their own lawsuits against GPB Capital.”

CNN | Ramishah Maruf | February 5, 2021

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