The FBI and NY Regulators Raid GPB Capital Holdings’ Trash Hauling Company

Just days after InvestmentNews reported that the Federal Bureau of Investigation (FBI) is now investigating alternative investment management firm GPB Capital Holdings, ProPublica is reporting that the FBI and regulators from New York City’s Business Integrity Commission (BIC) have raided the corporate offices of GPB Waste NY, which is the private trash hauling company once known as Five Star Carting that GPB Capital Holdings acquired in 2017. The raid reportedly involved a search warrant from the US Attorney’s Office to gather materials.

Aside from the FBI, GPB Capital Holdings is already under investigation by the US Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), the New Jersey Bureau of Securities, and Massachusetts Secretary of the Commonwealth William Galvin, who is investigating more than 60 brokerage firms that sold GPB Capital Holdings-related private placements to investors. However, public filings submitted to the SEC note that there were about 80 brokerage firms in the US at least authorized to sell investments to clients on behalf of GPB.

GPB Capital Holdings primarily invests in auto dealerships. However, it also purchases private trash hauling companies. NYC’s BIC is responsible for looking into possible misconduct or corruption involving the private trash industry in the city. Five Star, according to ProPublica, had previously dealt with a “troubled labor and safety record,” including government inspections that found that the company used unsafe trucks.

InvestmentNews, which also published an article on the raid of GPB Waste NY, spoke to a source who said that a number of investors that had purchased GPB Capital Holdings-related private placements held substantial positions in the trash hauling company. Now, questions are being raised as to how much due diligence the financial firms that sold private placements in Five Star Carting actually did prior to recommending them to investors, as well as whether brokers allowed the prospect of a high commission to distract them from really understanding what they were getting their customers involved in.

Also causing concern is that GPB’s Director of Waste Strategy, Rod Proto, was fired by trash collecting giant Waste Management in 1999 as its COO and president. The SEC then charged Proto with insider trading. In 2003, he settled by agreeing to pay a $3.7M fine and serve a five-year ban from working in a director or officer capacity for any public company.

ProPublica noted that the reasons for this month’s raid at GPB Waste NY are still not clear.

GPB Capital Holdings Private Placements
GPB raises funds to purchase businesses by persuading financial advisers to sell GPB private placements to rich clients. The investment firm claims it has raised $1.8B from accredited, high-net worth investors that purchased private placements in the auto dealers and waste management companies.

However, regulators and others are worried that not all of the investors that were sold GPB private laments were actually accredited, experienced investors. Because GPB Capital Holdings-sold private placements are illiquid, high-risk alternative investments, it is important that investors who buy them can handle the risks involved and are sophisticated and seasoned investors.

GPB Capital Holdings Investor Fraud
Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) has been speaking with investors who purchased GPB Capital Holdings-related private placements. Our private placement fraud lawyers have experience working with both high-net worth investors and retail investors. If you believe that your broker and/or their brokerage firm inappropriately recommended that you invest in a GPB private placement, our brokerage firm misconduct law firm can help you explore your legal options.