Investors were pitched attractive returns offered GPB and the broker-dealers who offered the GPB Funds. Now investors are crying investment fraud and there are a number of GPB Capital lawsuits pending. It appears that brokers were motivated by the 8% commission for selling GPB funds. It now appears like agents received over $100 million in commissions.
According to its website,” GPB Capital is a New York-based alternative asset management company focusing on getting income-producing private businesses.” Of note, GPB has a strong focus on the “automotive retail” sector. Since 2013, GPB increased $1.3 billion from investors in its GPB Automotive Portfolio and GPB Holdings II funds (“GPB Funds”).
GPB Capital Lawsuit & Fraud Investigation
In July 2017, GPB entered lawsuit Against a former business partner who allegedly reneged on a sale of multiple car dealerships. Since the lawsuit continues, additional problems for GPB have started to surface:
- April 2018: GPB failed to produce audited financial statements;
- August 2018: GPB declared no new investor funding would be approved;
- September 2018: Massachusetts Division of Securities launches investigation
- November 2018: GPB’s auditor resigned, citing perceived risks; and
- December 2018: FINRA and SEC launch investigations into broker-dealers that marketed GPB.
The investigations come as GPB has been shrouded in three or more lawsuits. Two of the company’s former co-directors of retail, Jeffrey Lash and Patrick Dibre, both dealers before joining GPB, have been engaged in separate lawsuits with the business over the previous year and a half, alleging breach of contract.
Lash filed a lawsuit in New York federal court last year for at least $30 million, which he voluntarily withdrew a month later. Lash, and his lawyer couldn’t be reached for comment.
GPB Capital Lawsuits Increase
In July 2017, GPB filed a lawsuit against Dibre at New York state court alleging that he failed to follow through with automobile dealership sales valued at $40 million. GPB searched for the court to purchase Dibre to record the four stores and that all profits would be paid to GPB. Dibre, at a counterclaim in March 2018, alleged GPB Capital’s declines were”due to a really complicated and manipulative Ponzi scheme.” A Ponzi scheme is a sort of fraud that pays present investors with funds collected from new investors. Dibre sought more than $32 million in damages.
“We’ve maintained consistently that the fund couldn’t cover the monies at the rates that it was paying out,” said Russell Shanks, Dibre’s attorney, by Cyruli Shanks in New York.
Back in October, a judge ruled to discount most of GPB’s claims against Dibre, but GPB is attractive. GPB is convinced it will”reach a positive resolution,” the firm’s spokeswoman wrote in her email address.
Merkin: GPB stopped paying.
They were paying me $330 a month which was a fantastic return,” Merkin said. She expected an 8% yield. “It is not guaranteed, but it was appealing enough,” she said.
Merkin’s payments stopped in December, she explained; however, GPB told her the block was temporary.
In the Dec. 20 letter to investors, GPB stated the distribution rate would change from consistent numbers to payments which would fluctuate based on company performance. (Back in April 2018, GPB Holdings I, a separate fund that includes automotive retail, managed IT solutions and debt plan investments, decreased the distribution rate that it was paying investors to 4 percent from 8 percent a year. In November, GPB”temporarily suspended” any supply, according to court records in a Delaware lawsuit filed with a GPB investor against the company.)
Filings to the SEC — the most recent dated May 2018 — show GPB’s automotive finance because 2013 raised over $622 million from over 6,300 investors. Another GPB fund raised almost $646 million in nearly 6,100 investors and paid commissions in nearly $48 million.
Investment Loss Recovery Group is currently investigating complaints from investors against GPB Capital Holdings Group. Investors can click here or call toll free 1-888-628-5590.
According to InvestmentNews, “As many as 60 broker-dealers have marketed GPB funds. While many were smaller [independent broker-dealers] IBDs, one of the most prominent listed in Securities and Exchange Commission filings were four Advisor Group broker-dealers: Royal Alliance Associates Inc., Sagepoint Financial Inc., FSC Securities Corp., and Woodbury Financial Services Inc.”
Brokers licensed with FINRA are required to follow the rules, laws, and regulations when recommending the purchase or sale of a security. Additionally, the broker-dealers are required by law to supervise broker activities.