GPB Capital Executives Found Guilty of Securities Fraud
From the desk of Jim Eccleston at ÍøÆسԹÏ
David Gentile, the founder and CEO of GPB Capital Holdings, and Jeffry Schneider, chief of broker-dealer Ascendant Capital, were found guilty on all fraud counts in a federal trial that concluded in Brooklyn. According to InvestmentNews, the seven-week trial ended with a jury convicting Gentile on five counts, including conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud, and two counts of wire fraud. Schneider was guilty of three counts, including securities fraud and wire fraud.
Despite the convictions, attorneys for Gentile and Schneider have indicated plans to appeal. Sentencing is scheduled for October 24, where both Gentile, 57, and Schneider, 55, could face up to 20 years in prison.
As reported by InvestmentNews, GPB Capital, founded in 2013, gained rapid success by selling high-risk private placements through numerous independent broker-dealers, eventually raising $1.8 billion from wealthy clients. The firm, led by Gentile and Schneider, promised investors an 8 percent annual return. However, issues began to surface six years ago when GPB failed to make timely financial filings with the SEC, triggering further scrutiny.
In 2019, the FBI raided GPB’s Manhattan offices, and in 2021, the Justice Department and SEC charged Gentile, Schneider, and another executive, Jeffrey Lash, with multiple counts of fraud. The charges included operating a Ponzi-like scheme and misrepresenting the source of funds used for investor payments. Lash, who pled guilty last year, testified against Gentile and Schneider hoping to receive a more lenient sentence.
The charges stemmed from a scheme to defraud over 10,000 investors by misrepresenting the financial health of GPB’s investment funds. InvestmentNews reports that Gentile and Schneider assured investors that the funds' operational income would cover monthly distributions. However, when the funds underperformed, they resorted to fraudulent tactics, including back-dating documents and using new investor capital to pay existing investors.
GPB Capital served as the general partner of several investment funds, which raised capital for private equity investments. Working with Ascendant Capital, Gentile and Schneider marketed these funds to investors while being fully aware of their underperformance. Despite this, they continued to authorize fraudulent payments.
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