US Govt seeks to intervene in SEC’s case against GPB Capital
The United States Government is seeking to intervene in the civil proceedings brought by the Securities and Exchange Commission (SEC) against Ponzi-like scheme GPB Capital.
According to a motion filed by the Government with the New York Eastern District Court on March 4, 2021, the Government wants to intervene in the SEC’s case and to stay civil proceedings because of the pendency of the parallel criminal case and a related, ongoing grand jury investigation.
A stay is appropriate because the government’s motion is timely and the same alleged fraudulent schemes are at issue in both the Civil and Criminal Cases. Moreover, a stay of proceedings is deemed necessary because civil discovery in the Civil Case would result in the defendants effectively avoiding the restrictions on criminal discovery that would otherwise pertain to them in the Criminal Case.
A stay is also necessary to preserve the secrecy of the ongoing grand jury proceedings, and could promote judicial economy.
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.