Did you suffer losses in a GPB Capital Holdings investment?
Galvin Legal is launching an investigation on behalf of investors who suffered losses investing in private placements offered by GPB Capital Holdings at the recommendation of their financial advisor. If you suffered losses investing in a one of the firm’s private placements, including, GPB Automotive Portfolio, GPB Holdings, GPB Holdings II, GPB Holdings III, GPB Holdings Qualified, GPB NYC Development, GPB Cold Storage, GPB Cars 12, GPB 5, GPB 6, or Armada Waste Management (f/k/a GPB Waste Management), then Galvin Legal may be able to help you recover your losses in a Financial Industry Regulatory Authority (“FINRA“) arbitration claim against the brokerage firm that recommended the investment.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
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Understanding GPB Capital Holdings
GPB Capital Holdings Offerings
SEC and FBI Investigations into GPB Capital Holdings
Massachusetts Securities Division Charges GPB Capital Holdings for Allegedly Defrauding Investors
Massachusetts is Investigating Broker-Dealers that Offered GPB Capital Holdings
GPB Capital Named in Class Action Filed in Texas Federal Court
GPB Sales Compensation Recipients
Your Brokerage Firm May be Liable for Unsuitable Investment Guidance
Filing a FINRA Arbitration Claim
What our Investor Losses Lawyers Can Do for You
Request a Free Consultation with a Securities Attorney
UPDATE 9/9/2020: Michael Cohn, a former SEC examiner who was hired as managing director and chief compliance officer at GPB Capital Holdings in October 2018, pled guilty on Tuesday to misdemeanor theft of government property. Federal prosecutors alleged that during discussions with GPB about obtaining a job there, Cohn told GPB senior management that he had inside information about an SEC investigation into the company, which they claim he disclosed. Cohn, who will be sentenced in January 2021, denied the allegations. Last year, Cohn was charged with obstruction of justice, unauthorized computer access, and unauthorized disclosure of confidential information, all felonies. However, the government dropped the felony charges which carried up to 20 years in prison, in return for a misdemeanor plea. He now faces between six months to one year in prison. Cohn previously worked as a securities compliance examiner and industry specialist in the SEC’s enforcement division, where he assisted investigations into violations of securities laws. According to a report published by Newsday, Cohn’s attorney, Scott Resnik, said that his client used the information as background to prepare for a job interview at GPB, not for felonious purposes. “…Cohn was with GPB for less than a year and GPB had no involvement with or knowledge of his wrongdoing,” a company spokesperson told the publication. “GPB terminated Cohn immediately upon learning of the situation.”
UPDATE 7/29/2020: GPB Capital holdings reported a dramatic decrease in its AUM at the end of June compared to 18 months earlier. In June 2020, the firm reported $238.6 million in AUM, according to its Form ADV. At the end of 2017, 18 months prior, the firm reported $434.3 million in AUM. This represents a decrease of 45.2%.
Understanding GPB Capital Holdings
GPB Capital Holdings is an alternative asset management firm. Under SEC Regulation D, the company is eligible to offer private placements to investors. The company focuses on acquiring positions in income-producing private companies in various industries, including the automotive retail and waste management sectors, and raised more than $1.8 billion in investor equity through various private placement offerings. In large part, its investments have been offered to investors through financial advisors and through registered brokerage firms. Some of the firm’s offerings include: GPB Automotive Portfolio, GPB Holdings, GPB Holdings II, GPB Holdings III, GPB Holdings Qualified, GPB NYC Development, GPB Cold Storage, GPB Cars 12, GPB 5, GPB 6, and Armada Waste Management (f/k/a GPB Waste Management).
The firm suspended fundraising and redemptions in August 2018 to, according to the company, “focus on accounting and financial reporting on the GPB Automotive Portfolio LP and the GPB Holdings II LP.” The company’s core investment model is to acquire positions in ‘income-producing’ private entities. In large part, its investments have been offered to investors through financial advisors and through registered brokerage firms.
Last summer, the company stated that GPB Holdings II and GPB Automotive Portfolio had seen declines in value of 25.4% and 39%, respectively.
GPB Capital Holdings has also been named in a class action lawsuit and other investigations. Investors have filed a class action lawsuit in the Western District of Texas that alleges violations of federal securities laws by GPB Capital Holdings, Ascendant Capital, and the Brokerage Firms. The amended prospective class action the investors claimed that “astronomical fees and undisclosed conflicts of interest undermined buyers of GPB Capital private placements from the start.” The complaint also alleges that although investors had been pitched yields of 8% and an internal rate of return for each investment of 15%, they were charged extraordinary fees of between 16% and 20%.
The company was supposed to file registration forms with the Securities and Exchange Commission and begin making important financial disclosures public for two of its largest funds. Even though the funds are private and not listed or traded on an exchange, they have over $10 million in total assets and 750 or more shareholders so are therefore required to file what is known as a “Form 10” with the SEC. The company is under investigation by the FBI and SEC and has failed to produce audited financial statements for its funds. Investors don’t know the value of the funds, and thus, their investments.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
GPB Capital Holdings Offerings
GPB Automotive Portfolio
According to its Private Placement Memorandum (“PPM”), GPB Automotive Portfolio’s “focus is on the identification, acquisition, profitable operation and disposition for gains of the Assets of income-producing automobile Dealerships located in North America. GPB seeks Dealerships that it believes to meet the following criteria: profitable with an established track record, led by strong management, long-term competitive advantages, a large target market, and potential for a profitable exit opportunity within two to five years from the date of acquisition.”
The PPM further states that GPB Automotive Portfolio’s Investment Strategy “focused on the franchised automobile dealership industry primarily because it has often been profitable. The industry has seen strong continued growth, a stable income stream via multiple profit centers, and demographic trends that may present new acquisition opportunities. A single automotive dealership is usually comprised of multiple sources of income, which can provide insulation against shifts in the market. While the current U.S. auto market is strong and predictions show continued growth, GPB understands how to insulate a Dealership against shifts in the marketplace in order to maintain an income stream.”
GPB Holdings Qualified
GPB Holdings Qualified was created to allow qualified investors to indirectly invest in GPB Holdings without incurring unrelated business taxable income. GPB Holdings Qualified is expected to invest substantially all of its net offering proceeds into GPB Holdings.
GPB Holdings
The GPB Holdings and GPB Holdings Qualified seek to provide their Investors with attractive medium to long-term returns by building a portfolio of income producing companies focused on acquisitions in a limited number of industries. It intends to accomplish this goal by doing the following:
- Acquiring controlling interests in early stage and middle market North American–based private companies
- Providing managerial assistance to such companies
- Developing the operations of these companies to increase their cash flow
GPB Holdings II
GPB Holdings III
GPB NYC Development
GPB Cold Storage
GPB Cars 12
GPB 5
GPB 6
Armada Waste Management (f/k/a GPB Waste Management)
Armada Waste Management (f/k/a GPB Waste Management) strategically acquires income-producing, private, North American middle-market Waste Management companies with at least five years of operating history. The Armada Waste Management (f/k/a GPB Waste Management) intends to have an initial focus in New York and New Jersey and will also pursue acquisitions in other Eastern U.S. markets, including but not limited to Connecticut, Florida, Maryland, Massachusetts, Pennsylvania, Virginia and Washington D.C. (together “Target Markets”).
Armada Waste Management’s (f/k/a GPB Waste Management) objective is to (i) acquire majority voting interests and / or primary control interests in income-producing private companies in the
Waste Management and ancillary industries, (ii) provide hands-on managerial and operational services to such companies, and (iii) further develop the Portfolio Companies’ operations and increase cash flow and current income from operations. Armada Waste Management (f/k/a GPB Waste Management) primary focus will be acquisitions of companies in the Waste Management industry with strong management, earnings and market position. Armada Waste Management (f/k/a GPB Waste Management) initial focus of the platform operating company and subsequent acquisitions will be concentrated in the commercial, industrial and recycling markets. To a lesser extent, it also intend to make acquisitions and investments in other opportunities in industries complimentary to the Waste Management sector, such as organics and food waste processing, document destruction, electronic waste and waste advisory / consulting services.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
SEC and FBI Investigations
GPB Capital Holdings missed multiple deadlines for its audited financial reports, most recently due to the resignation of the firm’s auditor and audit committee in November 2019. The resignations followed the indictment of Michael Cohn, its new managing director and chief compliance officer who joined the firm in October 2018.
Cohn, a former SEC examiner, was charged with obstruction of justice, unauthorized computer access, and unauthorized disclosure of confidential information for allegedly accessing and disclosing confidential information to the company while employed with the SEC.
Federal prosecutors alleged that during his discussions with the company about obtaining a job there, Cohn told the company’s senior management that he had inside information about the SEC’s investigation, which they claim he disclosed. Cohn is presumed innocent unless and until proven guilty.
The company has been under investigation by both the SEC and the FBI. Last year, the company disclosed that representatives from the FBI and the New York City Business Integrity Commission made an unannounced “visit” to the company’s headquarters in Manhattan. GPB Capital Holdings said that the agencies obtained a search warrant to collect materials from the premises and believes that the visit was a continuation of previous ongoing inquiries.
Specifically, the company had received a subpoena from the U.S. Attorney’s Office – Eastern District of New York that requested documents related to a waste management fund in connection with the NYC Business Integrity Commission’s investigation. Additionally, at the time, the firm confirmed that it had received subpoenas from the SEC and the New Jersey Bureau of Securities and said that it is cooperating with the various agencies and their document requests.
In October, the company’s CCO was charged with obstruction of justice in relation to the investigation.
While the company was not told the cause of the investigations, other than they are in connection with potential violations of general securities laws and regulations, the company pointed out that much of the information requests concern issues raised by former operating partner, Patrick Dibre.
The company sued Dibre in July 2017 for allegedly reneging on the sale of multiple car dealerships in the New York metropolitan area, and the company is seeking the return of $42 million it had paid to the former business partner.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Massachusetts Securities Division Charges GPB Capital Holdings for Allegedly Defrauding Investors
The Massachusetts Securities Division has charged the company with allegedly violating state securities laws, after an investigation found that the company purportedly issued marketing materials to more than 180 Massachusetts investors which contained material misstatements and omissions.
In an administrative complaint filed May 27, 2020, the division claims that Massachusetts residents contributed more than $14 million to five company funds, relying on private placement memoranda and other marketing materials which stated that investor distributions would be paid from operational profits. However, contrary to the information provided to investors, the regulators indicated that the company used investor funds to pay distributions.
“While GPB Capital maintained authority to suspend distributions whenever it wished, the firm continued to make its monthly distributions in order to maintain appearances and stay attractive to investors,” the complaint states. “In order to keep up with distributions, GPB Capital began dipping into other sources of income, contrary to statements made in its private placement memoranda and marketing materials.”
The complaint also alleges that the company failed to disclose related third-party transactions, conflicts of interest, and certain relationships, such as the one it had with Ascendant Alternative Strategies (AAS). AAS is a company indirectly owned by GPB Capital Holdings founder David Gentile and Jeffry Schneider, a “strategic advisor” at the company who has received compensation for his involvement with the company’s fund acquisitions.
The Massachusetts Securities Division is seeking an administrative fine on the company, as well as a permanent bar from registration in the state, and that all profits be disgorged, and rescission offers are made to all residents who were sold securities in violation of state law.
See Commonwealth of Massachusetts, Office of the Secretary of the Commonwealth, Securities Division, Docket No. E-2018-0100, In the Matter of: GPB Capital Holdings, LLC, Administrative Complaint.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Massachusetts is Investigating Broker-Dealers that Offered GPB Capital Holdings
In July 2018, the Massachusetts Securities Division announced that an investigation was being launched into at least 63 different brokerage firms that have offered GPB Capital Holdings offerings to investors. On April 30, 2018, the company missed the deadline to file required annual audited financial statements for GPB Automotive Portfolio and GPB Holdings II. In a letter sent to broker-dealer executives, it stated that both funds would “temporarily” stop accepting new investments, in order to allow the funds to focus on rectifying their financials. In addition, the two funds have also stopped redeeming investor shares until the new audited financials are complete.
Due to the company’s funds failing to timely file their audited financials, the Division opened an investigation into the sales practices of firms selling shares of GPB Holdings II and GPB Automotive Portfolio. The Division served 63 subpoenas to all broker-dealers the company reported as soliciting GPB Holdings II or GPB Automotive Portfolio in Massachusetts. In addition to assessing the number of Massachusetts investors exposed to these two funds, the sweep seeks to gather information regarding the sales, supervisory, due diligence, and approval process of the broker-dealer firms related to the sale of GPB products.
Massachusetts regulators are conducting this investigation in order to ensure that brokerage firms were not ignoring suitability rules and were conducting adequate due diligence when offering the company’s securities to investors. If any brokerage firms were falling short of these responsibilities, then they must be held accountable.
See Massachusetts Securities Division, Registration, Inspections, Compliance and Examination Section, December 2018 Newsletter.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Class Action Filed in Texas Federal Court
An investor originally filed the lawsuit in the United States District Court of the Western District of Texas alleging violations of federal securities laws by GPB Capital, Ascendant Capital, and several brokerage firms. The lawsuit is seeking to recover over $1.8 billion.
In the amended prospective class action lawsuit that was recently filed, the investors claim that “astronomical fees and undisclosed conflicts of interest undermined buyers of GPB Capital private placements from the start.” The complaint describes the company’s business plan as a “classic Ponzi scheme,” where old investors are paid with proceeds obtained from new investors. GPB Capital Holdings’s investors were allegedly promised an 8% return.
GPB Capital Holdings has been embroiled in legal disputes in the recent past. In November 2019, the company informed investors that they would not be supplying the audited financial reports by their deadline, even though investors have been awaiting the audits since April. The company has also been under investigation by both the SEC and the FBI. In October, GPB’s CCO was charged with obstruction of justice in relation to a GPB Capital Holdings investigation.
The amended class action, Kinnie MA IRA v. Ascend Capital, targets undisclosed conflicts of interest of two owners of GPB Capital Holdings, David Gentile and Jeffrey Schnieder. According to the complaint, Schnieder was also an owner of Ascendant capital, the broker-dealer that contacted other brokers to sell GPB Capital Holdings private placements. Though this conflict should have been revealed to investors, it was not.
The complaint states, “Ascendant Capital, GPB’s primary distribution agent, and GPB itself, were both controlled by their principals, David Gentile and Jeffrey Schnieder. However, neither GPB nor Ascendant, nor their principals, made disclosure of this co-ownership and common control to investors in offering materials for the securities.”
The complaint specifically references one victim, Loretta DeHay, of Austin, who was defrauded out of $100,000 of her life savings. Ms. DeHay stated, “I was assured that this was a safe investment that would generate retirement income for me that I could rely on,” DeHay said. “My brokerage firm sold me on GPB’s automotive division. I trusted my broker, and he recommended what turned out to be a Ponzi scheme. Now, I’m fighting to hold GPB, the brokerage firm, and anyone else who profited off of this accountable.”
The lawsuit also stated that GPB Capital Holdings’s administrators siphoned off investor funds in so many ways, that providing an 8% return to investors was impossible. Many retirees who were victims of the Ponzi scheme reside in Texas, Florida, and Arizona.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Sales Compensation Recipients
Purshe Kaplan Sterling Investments
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Your Brokerage Firm May Be Liable for Unsuitable Investment Guidance
FINRA requires brokerage firms to conduct due diligence on investments and to conduct a suitability analysis when recommending securities to a customer that takes into account the customer’s knowledge and experience. One of the most important securities regulations is FINRA Rule 2111. Under this rule, often referred to simply as the suitability rule, financial advisors and broker-dealers must only recommend and sell securities that are reasonably appropriate for the investment experience, needs, and objectives of each individual client. Brokerage firms that fail to conduct adequate due diligence or that make unsuitable recommendations can be held responsible for the customer’s losses in a FINRA arbitration claim.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Filing a FINRA Arbitration Claim
If your broker or brokerage firm recommended or offered GPB Capital Holdings investments, and you suffered significant investment losses as a result, you may be eligible to recover compensation through a FINRA arbitration claim. In most cases, investors are required to sign customer agreements that mandate arbitration as the exclusive legal remedy.
Our securities fraud lawyers have a deep understanding of the FINRA arbitration process. To initiate arbitration — no matter what state you live in — you must prepare and submit a Statement of Claim. While this is merely the first step in the claims process, it is imperative that you get this step right. Your Statement of Claim should be comprehensive: it should contain the allegations you are raising, the dates the violation occurred, the specific cause of action, a basic accounting of the evidence, and the damages being requested.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
What Our Investor Losses Lawyers Can Do For You
At Galvin Legal, PLLC, we offer free, fully confidential case evaluation to investors nationwide. If you sustained serious investment losses in GPB Capital Holdings investments or any other private placement, we are prepared to help. Our legal team will start by carefully reviewing the facts and strength of your claim.
We will vigorously investigate your case and help you understand and assess all of your available options. Our securities fraud lawyer knows how to hold negligent investment advisors and investment advisory firms liable for their misconduct and we will fight tirelessly to protect your rights.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Request a Free Consultation with a Securities Attorney
If you suffered losses investing in one of the company’s private placements, including, GPB Automotive Portfolio, GPB Holdings, GPB Holdings II, GPB Holdings III, GPB Holdings Qualified, GPB NYC Development, GPB Cold Storage, GPB Cars 12, GPB 5, GPB 6, and Armada Waste Management (f/k/a GPB Waste Management), and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
This information is all publicly available and is being provided to you by Galvin Legal, PLLC.
Galvin Legal, PLLC is a national securities arbitration, securities mediation, securities litigation, securities fraud, securities regulation and compliance, and investor protection law practice. For more information on Galvin Legal, PLLC and its representation of investors, please visit www.galvinlegal.com or call 1-800-405-5117.
