Massachusetts Authorities Charge GPB Capital in Civil Complaint Alleging Fraud

The lawsuit claims that regulators made false statements to nearly 200 investors who invested over $14 million. 

The Sonn Law Group is investigating allegations that brokers recommended investments in GPB Capital Holdings. If you or a family member has suffered losses investing, we want to discuss your case. Please contact us today for a free review of your case.

The Commonwealth of Massachusetts Securities Division filed an administrative complaint against GPB Capital Holdings in civil court on May 27, 2020. 

In the complaint, the Massachusetts Securities Division claims that GPB and related entities and executives siphoned money from the firm’s operations and engaged in self-dealing through interconnected business entities.

GPB and Ascendant Capital allegedly promised investors monthly distributions based on an 8% annual rate of return, as well as the prospect of capital gains once their investments were realized. GPB initially stayed true to these promises and made investor distributions of 8%. However, as GPB Capital continued to expand, it soon became apparent that there was not enough capital to keep making the same distributions.

Rather than limiting distributions, GPB Capital continued taking on new investors, especially those investing in GPB Automotive and GPB Holdings II. Even though GPB had the authority to suspend distributions at any time, the monthly distributions continued to maintain appearances and continue attracting new investors. To keep up with the monthly distributions, the complaint alleges that GPB eventually began dipping into other income sources in order to pay the investors.

The complaint states that GPB Holdings, GPB Holdings II, GPB Automotive, and GPB Waste Management all turned to investor contributions to pay the monthly distributions to older investors. Despite the fact that the continued distributions exceeded the funds’ net incomes, GPB never updated any of its disclosure or marketing materials to reflect the information. The complaint alleges that based on GPB’s statements, the fund has paid out almost $17.9 million more than its net income from 2013-2017, and over half of the distributions came from investor funds. 

GPB has not issued audited financial statements for the fund, as required by the SEC rules, since 2016. The complaint alleges that 180 Massachusetts investors contributed more than $14 million to GPB Capital under false and misleading pretenses, in reliance on the private placement memoranda and marketing materials they were provided. The State accused GPB of making false and misleading statements and omitting material facts in connection with the officer and sale of GPB Holdings, GPB Automotive, GPB Holdings II, GPB Waste Management, and GPB NYC Development.

Securities regulators in Massachusetts are seeking fines, disgorgement of profits and a permanent ban on the New York firm from doing business in the state, according to an administrative complaint filed Wednesday. The claim will go before a state hearing officer for adjudication.

GPB Capital has been embroiled in legal disputes in the recent past. In November 2019, GPB informed investors that they would not be supplying the audited financial reports by their deadline, even though investors have been awaiting the audits since April. GPB Capital has also been under investigation by both the SEC and the FBI. In October, GPB’s CCO was charged with obstruction of justice in relation to a GPB investigation. 

GPB Capital Holdings manages the following nine private placements:

• GPB Automotive Portfolio, LP
• GPB Cold Storage LP
• GPB Holdings, LP
• GPB Holdings II, LP
• GPB Holdings III, LP
• GPB Holdings Qualified, LP
• GPB NYC Development, LP
• GPB Waste Management Fund, LP

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The Sonn Law Group is currently investigating allegations that brokers recommended investments in GPB Capital Holdings. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.