Regulator Wants to Prevent Alternative Asset Firm From Causing Investors More Financial Harm
In U.S. District Court for the Eastern District of New York in Brooklyn, the Securities and Exchange Commission (SEC) has submitted a court filing asking that a monitor be appointed to prevent GPB Capital Holdings, LLC from committing more alleged misconduct and disposing of any assets that could be used to recover investors’ money. The regulator is suing the alternative asset firm for allegedly defrauding more than 17,000 investors in an over $1.7B Ponzi scam.
The SEC contends that having a monitor is warranted and needed. The Commission wants to give this person broad powers over “non-privileged books, records, and account statements for the entities and assets” related to GPB Capital Holdings’ portfolio companies and funds.
Specifically, the SEC is requesting that Managing Director, Joseph Gardemal, of Alvarez & Marsal Disputes and Investigations, be named as the monitor. He is based in Washington DC.
What Would the SEC Monitor Do?
SEC would want this monitor against GPB Captial to be given the authority over whether to approve:
- Proposed material corporate transactions by GPB and Highline Management, which oversees the alternative asset firm’s business affairs;
- Any credit extension not in line with regular business;
- Key business strategy changes, as well as compensation modifications involving a GPB executive, affiliate, or party related to Highline Management or GPB;
- The hiring of management-level personnel;
- The decision to restart GPB investor distributions, which were suspended in late 2018;
- Any decision involving the filing of a potential bankruptcy proceeding by GPB Capital Holdings.
FBI Files Parallel Criminal Fraud Case, Makes Arrests
The SEC fraud lawsuit names GPB Capital Holdings, its owner and CEO David Gentile, Ascendant Capital owner Jeffry Schneider, Ascendant Capital, Ascendant Alternative Strategies, and ex-GPB managing partner Jeffrey Lash as defendants. The FBI, which also has been investigating the Ponzi fraud allegations involving GPB for two years, arrested the three men after filing parallel fraud charges.
Meanwhile, numerous state securities fraud lawsuits have followed.
On February 9, Gentile pleaded not guilty to the criminal charges of securities fraud, conspiracy, and wire fraud. He was released after a $500K bond was paid.
On February 8, GPB Capital Holdings issued a statement expressing disappointment over the probes and lawsuits while denying all allegations. A few days before that, Gentile stepped down as CEO of the alternative asset firm. He was replaced as interim CEO by CFO, Robert Chmiel.
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For more than two years, our experienced GPB private placement fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) have been going after the many broker-dealers that earned more than $160M in commissions from selling GPB investments to its customers.
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