NY Court stays SEC’s action against GPB Capital
The action brought by the United States Securities and Exchange Commission (SEC) against Ponzi-like scheme GPB Capital has been stayed. On March 10, 2021, Chief Judge Margo K. Brodie of the New York Eastern District Court granted a motion by the Government to intervene and stay the SEC’s case.
The civil case is now stayed until the conclusion of the related criminal case and the ongoing grand jury investigation. The Court excludes from this stay any work performed by the Monitor, matters related to the Monitorship, or any future expansion of the Monitorship. The government shall inform the Court when the related criminal case has concluded.
Let’s recall that, the SEC’s complaint alleges that GPB Capital was at the heart of a Ponzi scheme that raised over $1.7 billion.
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.