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FBI Is Investigating GPB Capital Holdings

InvestmentNews reports that the Federal Bureau of Investigation is investigating GPB Capital Holdings. The alternative investment management firm said that the FBI stopped by unannounced to its New York offices last week. The visit took place a few months after both the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra) launched separate probes into the firm, which claims to have raised $1.8B from accredited, high net worth investors via private placement funds invested in waste management and car dealerships. WealthManagement.com reports that GPB Capital Holdings-sold private placements that are risky, illiquid alternative investments. However, there is growing concern that not all of these investors, were, in fact, sophisticated, accredited, high net worth parties.

In September, Massachusetts Secretary of the Commonwealth William Galvin announced it was investigating 63 brokerage firms for selling GPB Capital Holdings-issued private placements. Among the broker-dealers that sold these investments were Advisor Group firms Sagepoint Financial Inc, Royal Alliance Associates, Inc., Woodbury Financial Services, Inc., and FSC Securities Corp. News of Secretary

Galvin’s probe came just a month after GPB Capital Holdings announced that it was pausing its efforts to raise investor funds to deal with accounting and financial reporting issues involving two of its largest funds, the GPB Holdings II and the GPB Automotive Portfolio, which together reportedly raised almost $1.3B of investor money while paying brokers over $100M in commissions. Both funds missed an earlier deadline to file statements with the SEC.

In November, GPB Capital said that its auditor, Crowe LLP, had stepped down from that role over what the private placement firm’s CEO David Gentile said where “perceived risks” that it felt were outside “internal risk tolerance parameters.” A new auditor was promptly retained.

Because GPB funds are high risk and complex investments, they are not for every investor, especially the typical retail investor. Private placement funds, by their very nature, usually should only be sold to accredited investors that are knowledgeable about investing and whose portfolio can handle volatility and risk. The SEC considers someone to be an “accredited” investor if the individual has a net worth of over $1M of assets (not including his or her main residence) or a yearly income of more than $200K (or a joint income of $300K) over the last two years, including the reasonable expectation that the income will remain at least that during the current year.

Unfortunately, there are concerns that retail investors may have been sold investments in the following GPB funds:

  • GPB Holdings
  • GP Holdings II
  • GPB Holdings III
  • GPB Automobile Portfolio
  • GPB Cold Storage
  • GPB Holdings Qualified
  • GPB Waste Management
  • GPB NYC Development

According to public filings submitted to the Securities and Exchange Commission, there were approximately eighty broker-dealers across the country who sold, or were at least authorized to sell, these investments for GPB, including Aegis Capital Corp., D.H. Hill Securities, Purshe Kaplan Sterling Investments, Sagepoint Financial, Inc., Woodbury Financial Services, Inc., and many others.

It is the duty of brokers and their broker-dealers to make sure that a private placement is only recommended to investors for whom they are suitable. Please contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) to speak with one of our experienced private placement fraud lawyers if you invested in a GPB fund and have suffered losses.

You want to work with an experienced investor fraud attorney that understands complex investments and knows how to fight for your financial recovery. SSEK Law Firm has helped thousands of investors in recouping their investor fraud losses.

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