The Court-appointed monitor in the SEC’s action against Ponzi-like scheme GPB Capital Holdings LLC today submitted a letter at the New York Eastern District Court. The document, seen by FX News Group, recommends continuation of the monitorship.

The Monitor says:

“Based on the results of the work that my team has performed over the past 60 days, and following consultations with the Securities and Exchange Commission and current management of GPB, I write to recommend continuation of the monitorship for a period of 180 days”.

At this point, audit and valuation reports have not yet been completed by GPB’s outside professionals, and the Monitor continues to work with management in connection with the development of the most appropriate investment strategy for each of the GPB Funds moving forward. Further, the Monitor’s team continues to work with management in connection with determination of the most appropriate approach to the retention or disposition of certain assets of GPB.

In February this year, the United States Securities and Exchange Commission (SEC) brought charges against three individuals and their affiliated entities engaged in running a Ponzi-like scheme. The scheme raised over $1.7 billion from securities issued by a New York-based asset management firm and registered investment adviser, GPB Capital.

The SEC’s complaint alleges that David Gentile, the owner and CEO of GPB Capital, and Jeffry Schneider, the owner of GPB Capital’s placement agent Ascendant Capital, lied to investors about the source of money used to make an 8% annualized distribution payment to investors. According to the complaint, these defendants along with Ascendant Alternative Strategies, which marketed GPB Capital’s investments, told investors that the distribution payments were paid exclusively with monies generated by GPB Capital’s portfolio companies.

As alleged, GPB Capital actually used investor money to pay portions of the annualized 8% distribution payments. GPB Capital and Gentile with assistance from Jeffrey Lash, a former managing partner at GPB Capital, also allegedly manipulated the financial statements of certain limited partnership funds managed by GPB Capital to perpetuate the deception by giving the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it actually was.

The SEC’s complaint further alleges that GPB Capital and Ascendant Capital made misrepresentations to investors about millions of dollars in fees and other compensation received by Gentile and Schneider.

Furthermore, GPB Capital allegedly violated the whistleblower provisions of the securities laws by including language in termination and separation agreements that impeded individuals from coming forward to the SEC, and by retaliating against a known whistleblower.

The SEC’s complaint charges Gentile, Schneider, GPB Capital, Ascendant Alternative Strategies, and Ascendant Capital with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, and Lash with aiding and abetting certain of those violations. The complaint also charges GPB Capital and Gentile with violating the antifraud provisions of the Investment Advisers Act of 1940 and charges GPB Capital with violating the registration and whistleblower provisions of the Exchange Act and the Advisers Act’s custody and compliance rules.