GPB Capital Executives Sentenced for Fraud in Private Placement Scheme
From the desk of Jim Eccleston at 麻花传媒
Two former top executives at GPB Capital Holdings received prison sentences for their roles in a years-long investment fraud scheme. According to InvestmentNews, a federal court sentenced founder David Gentile to seven years and sales chief Jeff Schneider to six years in prison.
A jury convicted Gentile, 58, on five counts of fraud and Schneider, 56, on three counts last August. The charges stem from their management of GPB Capital Holdings, a firm Gentile launched in 2013. Before founding GPB, Gentile worked as a Long Island accountant while Schneider built a career as a broker-dealer executive.
InvestmentNews reports that the firm raised $1.8 billion from wealthy investors, marketing its high-risk private placements through a network of independent broker-dealers. These placements promised steady 8 percent annual returns, investing mainly in auto dealerships and waste management companies.
However, when fund performance lagged, prosecutors said Gentile and Schneider falsified documents and paid distributions using new investor capital to mask the shortfalls.
Those deceptive tactics fueled additional sales of GPB funds through financial advisors eager to secure high commissions permitted under industry rules for private placements. InvestmentNews reports that the commissions were often as steep as 10 percent. Investor payouts stopped in 2018, and since then, clients have waited for any recovery of funds.
In 2018, GPB raised red flags when it failed to file audited financial statements with the Securities and Exchange Commission. By February 2019, the FBI had raided GPB’s Manhattan offices. In 2021, the Justice Department and SEC formally charged Gentile, Schneider, and executive Jeffrey Lash with securities fraud, wire fraud, and conspiracy, accusing them of operating a Ponzi-like scheme.
In a recent development, a federal judge approved the release of $400 million to some of GPB’s defrauded investors. During the litigation, it was also revealed that GPB had covered $75 million in legal costs for Gentile and Schneider, according to InvestmentNews.
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