Former GPB Capital Executive Pleads Guilty to Wire Fraud

On Tuesday, June 6, 2023, Jeffrey Lash, a former executive of GPB Capital Holdings, pleaded guilty to one count of wire fraud in federal court in Brooklyn, NY.

In 2021, a federal grand jury brought criminal charges against Lash, David Gentile (founder and owner of GPB Capital), and a third individual, Jeffry Schneider. The charges are related to their management of the company, which has been described as a “Ponzi-like scheme.” In February 2021, the SEC also charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.7 billion from over 17,000 investors, many of whom were retirees.

The criminal complaint alleged that Mr. Gentile, Mr. Lash, and Mr. Schneider used new money invested by retail investors to cover the promised 8% returns to prior investors, yet failed to disclose the source of the distributions to investors.

Mr. Lash could face more than 15 years in prison as a result of the guilty plea for his alleged role in the Ponzi-like scheme. Sentencing is scheduled for October 4, 2023.

A trial for Mr. Gentile and Mr. Schneider is scheduled to begin in June 2024.

Since February 2021, GPB Capital has been operating under the supervision of a court-appointed monitor. Despite liquidating a significant portion of the firm’s assets, the company’s managers have struggled to devise a plan for distributing the cash at their disposal to investors and other claimants.

The court-appointed monitor and the United States Securities and Exchange Commission have recommended putting GPB Capital into receivership, a court-appointed tool that would put the entire company, its assets, and all financial and operating decisions under the control of a single court-appointed receiver. The proposal has been contested by the company’s owner, David Gentile. The Court has yet to act on the receivership proposal.

GPB Capital had stated on its website in April 2023 that it could not come up with a distribution plan or make any distributions to investors until the court rules on a receivership. Limited partners have not received distributions since 2018, while their invested capital remains in limbo.

According to the recent regulatory filings, it appears that GPB Capital is holding back a significant reserve to cover potential liabilities arising out of numerous regulatory, ligation, arbitration, and other proceedings. The company disclosed that any liability originating from such actions could result in an outflow of cash, which would most likely not occur until 2024 at the earliest.

Further, GPB Capital’s partnerships, such as GPB Automotive, GPB Holdings, GPB Holdings II, GPB Waste Management, or GPB Cold Storage, are setting aside a large amount of money to cover the legal expenses of its current and former officers, directors, principals, representatives, and affiliates, for any legal expenses and costs they are incurring connected within the numerous litigations and disputes that are currently pending. GPB Capital has disclosed in regulatory filings that distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires.

GPB Fraud and Brokerage Firms’ Liability

GPB Capital Holdings LLC, a private-equity firm based in New York, was established in 2013. It acted as the primary partner of several investment funds, including GPB Holdings, LP, GPB Holdings II, LP, GPB Automotive Portfolio, LP, GPB Waste Management, LP, and GPB Cold Storage, LP.

In February 2021, the SEC accused GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies of orchestrating a Ponzi-like scheme, defrauding nearly 17,000 retail investors across the nation and gathering approximately $1.7 billion via securities issued by GPB Capital.

GPB Capital solicited capital from private retail investors via private placement offerings, which were sold by nearly sixty broker-dealers and investment advisory firms across the country. However, significant concerns have been raised regarding the broker-dealers’ failure to conduct proper due diligence regarding GPB Capital and the GPB funds.

The Financial Industry Regulatory Authority (FINRA) mandates that “reasonable diligence” provides the firm or associated person with a clear understanding of the potential risks and rewards of the recommended security or strategy. Brokerage firms may have neglected to conduct sufficient due diligence into GPB Capital and its funds before selling the private placement offerings to their clients, possibly overlooking numerous red flags, including detecting whether distributions were being paid out from operating revenue or from invested capital. In the case of GPB Capital, the operating revenues of its partnerships were not sufficient to cover the company’s promised 8% distributions, yet the payouts continued. Brokerage firms either failed to detect these discrepancies or ignored them.

Investors may have legal recourse against brokerage firms or investment advisory firms due to such due diligence failures or other sales practice violations. It’s important to note that filing an arbitration claim does not prevent an investor from receiving potential future distributions from the GPB funds.

Investors can potentially recover investment losses by filing claims against broker-dealers or investment-advisory firms that sold GPB private placement offerings for large commissions.

Through 2021, GPB Capital investors have won over $2.4 million in monetary awards in 10 out of 12 (over 83%) arbitration claims that have proceeded to a final hearing.

What Can GPB Investors Do?

Iorio Altamirano LLP, a leading securities arbitration law firm based in New York, NY, is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

Our law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

Iorio Altamirano LLP is actively investigating claims on behalf of GPB investors who purchased the security through a broker-dealer or registered investment advisor, including:

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses. Our law firm has helped GPB investors recover hundreds of thousands of dollars in losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (855) 430-4010 for a free and confidential consultation and review of your legal rights.