US Charges CEO Of GBC Capital In $1.8 Billion Ponzi-Like Fraud

US Charges CEO Of GBC Capital In $1.8B Fraud

Federal prosecutors in New York announced Thursday (Feb. 4) in a press release the indictment of three people linked to private equity firm GPB Capital Holdings on charges including securities fraud, wire fraud and conspiracy.

According to the release, the Department of Justice alleged the three individuals and colleagues told investors in several private equity funds they would receive monthly distributions generated by the funds’ portfolio companies operating profits. Instead, the government alleged, the funds made the pay-outs but from sources such as capital contributed by investors.

“As alleged, by paying investors from an undisclosed and improper source such as investor capital, the defendants repeatedly misled investors about the health and performance of their investments,” Acting U.S. Attorney DuCharme said in the release. “This Office is committed to ensuring honesty and integrity in the management of investment funds.”

Since its 2013 inception, GPB raised more than $1.8 billion from investors, the indictment, which was unsealed Thursday, stated. The company stated in a December securities filing that it had about $239 million in assets under management.

William F. Sweeney Jr., assistant director-in-charge of the FBI’s New York field office, which took part in the investigation leading to the indictments, added in the release that the notion of paying investors exclusively from portfolio companies’ profits “was all a lie. In truth, a significant portion of GPB’s distributions were paid directly from investor funds.”

The funds involved were GPB Holdings and GPB Automotive Portfolio, according to the release.

The defendants, all arrested Thursday, according to the release, are David Gentile, 54, of Manhasset, New York.; Jeffrey Lash, 51, of Naples, Florida; and Jeffry Schneider, 52, of Austin, Texas. Plea information was not available as of Thursday evening.

GPB is based in New York. The firm also has a pending case brought by Massachusetts regulators alleging improprieties.