The head of an investment advisory firm that raised over US$1.7 billion from investors has been convicted on an array of fraud-related charges.
Following an eight-week trial, a federal jury in New York convicted David Gentile, the founder, owner and CEO of advisory firm GPB Capital Holdings LLC, along with Jeffry Schneider, the owner and CEO of a marketing company, Ascendant Capital LLC, on securities fraud, wire fraud and conspiracy charges.
GPB, an investment advisory registered with the U.S. Securities and Exchange Commission (SEC), served as general partner to several private equity funds. Ascendant Capital was founded to market the GPB funds to investors.
According to U.S. authorities, the firms engaged in a long-running scheme to defraud more than 10,000 investors by misrepresenting the performance of the funds and the source of monthly distribution payments to investors.
While investors were told that monthly distributions from the funds would be fully funded from their operations, authorities alleged that when the funds’ performance lagged, the funds used investor capital to pay distributions, and tried to hide the shortfalls with fraudulent, back-dated documents.
“The jury found that the defendants lied to investors about the health of their funds and the source of fund distribution payments, all while they were fraudulently making those distribution payments with investor capital to maintain the appearance of successful portfolio companies,” said Breon Peace, U.S. attorney for the Eastern District of New York, in a release.
In 2021, the SEC charged Gentile, Schneider and their companies with securities law violations. It also charged GPB with violating whistleblower protection laws for retaliating against a whistleblower and including anti-whistleblower language in its termination agreements.
In December 2023, GPB Capital, which had been under control of a court-appointed monitor, was placed into receivership.