Two broker-dealers, Sagepoint Financial and Royal Alliance, recently made headlines after investors who bought GPB Capital Holdings private placements from them sued the alternative asset firm in a class action securities fraud case. GPB Capital Holdings, which invests in waste management and car dealerships, is accused of operating a $1.8B Ponzi scam.
The lead plaintiffs of the first class action securities lawsuit are Karen Loch of Georgia and Victor Wade of Texas. They invested in two GPB funds–$50K in GPB Holdings II for Wade that he purchased through Sagepoint Financial and $75K in GPB Automotive Portfolio for Lock through Royal Alliance Associates.
GPB Holdings II and GPB Automotive are GPB’s two largest funds, with both having raised over $600M from over 6000 investors. The two funds are not listed or traded on any exchange. In May, InvestmentNews reported that their assets were over $10M and they had at least 750 shareholders, thus requiring them to be registered with the US Securities and Exchange Commission (SEC). Still, GPB failed to register both funds by their April 30, 2018 deadline and no annual reports have been filed since. This failure has kept Lock, Wade, and thousands of other investors from receiving even the most basic information about both funds and their money.
While Lock and Wade are not suing the two brokerage firms in their lawsuit against GPB, it is important to note that Sagepoint and Royal Alliance earned high commissions for the sales to them. Meantime, Lock and Wade and thousands of other investors are the ones who have since suffered as the various GPB funds have plunged in value, some by more than 70%, and investment redemptions were suspended last year.
Sagepoint and Royal Alliance are both Advisors Group subsidiaries. Advisors Group is one of the biggest independent wealth management groups in the US.
GPB Private Placement Fraud
The two brokerage-dealers are not the only Advisors Inc. affiliates whose brokers sold GPB private placements to customers. The network’s two other brokerage firms–FSC Securities Corporation and Woodbury Financial Services– did so as well, as have dozens of other firms that are now under investigation by Massachusetts Secretary of the Commonwealth William Galvin. Collectively, the broker-dealers and their representatives have earned over $160M from selling GPB private placements to clients in the following funds:
- GPB Holdings II
- GPB Holdings III
- GPB Automotive Portfolio
- GPB NYC Development
- GPB Cold Storage
- GPB Waste Management
GPB private placements are not for every type of investor. They can be risky and typically should only be sold to experienced investors with high net worths. Unfortunately, many investors who were Sold GPB investments never should have purchased them to begin with.
Broker-dealers and their registered representatives have a duty to make sure that investments that they recommend for their clients are appropriate for them, their portfolios, their investment goals, and the degree of risk that they can handle.
GPB Investment Fraud Law Firm
Throughout, the US, our GPB investment fraud lawyers at Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) are working with investors to pursue broker negligence claims against these firms to help our clients recover their money.