Investment Fraud Allegations Against GPB Capital Holdings


Zamansky LLC Investigates Potential GPB Capital Holdings Lawsuit for Claims of Frauds

Zamansky LLC is currently investigating GPB Capital Holdings (GPB) in relation to allegation that the firm has engaged in a number of fraudulent practices that caused financial harm to investors. GPB Capital Holdings’ alleged fraud has also recently been the subject of investigations conducted by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the Federal Bureau of Investigation (FBI). As summarized by InvestmentNews in March 2019:

“GPB Capital . . . raised $1.8 billion from accredited investors through private placement funds, which invest in auto dealerships and the waste management industry. . . . Registered [representatives] from dozens of independent broker-dealers sold the high risk, high-commission private placements.

“In December, InvestmentNews reported that [FINRA] and the [SEC] launched investigations in to GPB, citing industry sources. . . . The focus of the SEC’s inquiry was the accuracy of disclosures made by GPB to investors, the performance of various funds and the distribution of capital to investors, according to an industry source.”

The scrutiny of GPB Capital Holdings’ disclosures began in April 2018 when it missed a deadline to file mandatory registration forms with the SEC. Since then, GPB and the brokerage firms that sold its private placements to accredited investors have faced multiple legal inquiries. As of August 2019, the timeline of major events is as follows:

  • April 2018 – GPB Capital Holdings missed its deadline to file registration forms, which should have included audited financial statements, with the SEC.
  • August 2018 – GPB Capital Holdings announced that it would not be accepting funds from new accredited investors as it reviewed its financial statements for certain funds.
  • September 2018 – The Massachusetts Securities Division opened an investigation into 63 brokerage firms selling shares of GPB Capital Holdings’ funds. As the Securities Division reported in December, the investigation sought information pertaining to, “sales, supervisory, due diligence, and approval practices of the broker-dealer firms related to the sale of GPB products.”
  • November 2018 – Crowe LLP abruptly resigned as GPB Capital Holdings’ accounting firm, reportedly citing perceived dangers related to GPB’s financial or disclosure practices.
  • December 2018 – FINRA and the SEC launched their independent investigations into GPB Capital Holdings’ disclosure practices and the brokerage firms that sold GPB funds to accredited investors.
  • February 2019 – The FBI and the New York City Business Integrity Commission conducted an unannounced inspection of GPB Capital Holdings’ offices in Manhattan.

The alleged GPB capital fraud that is under investigation relates to the following funds:

  • GPB Automobile Portfolio, LP
  • GPB Cold Storage, LP
  • GPB Eurobond Finance PLC
  • GPB Holdings, LP
  • GPB Holdings II, LP
  • GPB Holdings III, LP
  • GPB Holdings Qualified, LP
  • GPB NYC Development, LP
  • GPB Scientific, LLC
  • GPB Waste Management, LP (formerly GPB Waste Management Fund, LP)

The brokerage firms reportedly targeted in the SEC, FINRA and Massachusetts Securities Division investigations include (but are not limited to):

  • Aegis Capital Corp.
  • Ausdal Financial Partners
  • Concorde Investment Services
  • FSC Securities Corp.
  • Geneos Wealth Management
  • Hightower Securities
  • International Assets Advisory
  • Money Concepts Capital Corp.
  • Newbridge Securities Corporation
  • National Securities Corporation
  • Royal Alliance Associates Inc.
  • Sagepoint Financial Inc.
  • Woodbury Financial Services Inc.

Are Disclosure Violations Indicative of GPB Capital Fraud?

Our investigation is focused on whether GPB Capital Holdings’ disclosure violations constitute fraud perpetrated against the accredited investors who purchased shares of GPB Capital Holdings’ proprietary funds. If so, accredited investors who purchased shares of these funds may have grounds to file a lawsuit to recover GPB capital losses.

Under federal and state securities laws, firms that offer private placements to accredited investors have a legal obligation to accurately disclose certain material information. This includes timely disclosing audited financial statements. The fact that GPB Capital Holdings did not file its audited financial statements with the SEC on time, combined with its independent auditor’s sudden resignation, is a potential red flag; however, more information is needed in order to determine whether a GPB Capital Holdings lawsuit related to disclosure violations is likely to be successful. Any accredited investors who purchased shares in GPB capital funds should contact Zamansky LLC promptly so that our attorneys can determine whether grounds exist to pursue legal action against GPB.

Did Aegis Capital Corp. and Other Brokerage Firms Engage in Fraudulent Sales Practices Related to GPB Capital Funds?

Our investigation is also following FINRA’s and state and federal securities regulators’ line of inquiry into the sales practices of the brokerage firms that sold GPB capital fund shares to accredited investors. If GPB Capital Holdings was defrauding investors, and if these firms knew (or should have known) of the fraud, then they may be liable for investors’ losses as well. As more information comes to light, other potential causes of action against these brokerage firms may include:

  • Unsuitable Investment Recommendations – Brokers have a duty to provide their clients with suitable investment advice. GPB Capital Holdings’ private placements were highly-speculative investments that were unsuitable for all but the most-aggressive accredited investors. If brokers steered investors toward GPB private placements knowing that these investments were not suited to investors’ personal risk tolerances and investment objectives, then these brokers may be liable for investment fraud.
  • Breach of Fiduciary Duty/Failure to Conduct Due Diligence – Investment advisors owe a fiduciary duty to their investor clients. Among other things, this requires advisors to act in their clients’ best interests and avoid making recommendations that involve too much risk. When investment advisors fail to act in their clients’ best interests (i.e. by failing to conduct adequate due diligence before recommending a high-commission investment product), these clients can seek to recover their losses through FINRA arbitration.
  • Misrepresentation or Omission of Material Information – Another common form of broker and investment advisor fraud involves misrepresentation or omission of information that is material to their clients’ investment decisions. Once again, if brokerage firms knew that GPB Capital Holdings was potentially withholding information from investors and the SEC, or if they had any other reason to suspect that investing in GPB’s proprietary funds would involve unreasonable risk, then they had an obligation to share this information with their clients.
  • Excessive Commissions/Conflict of Interest – According to reports, some brokerage firms received commissions as high as 10 percent for the sale of GPB capital funds. All told, commissions from brokerage firms’ sales of GPB funds may have totaled $167 million. If these commissions influenced brokers’ decisions to recommend GPB funds to accredited investors, then this conflict of interest could provide yet another cause of action for investors to recover their fraudulent losses.

Our Attorneys are Prepared to Represent Investors in Arbitration Claims and Securities Fraud Lawsuits Related to GPB Capital Losses

As our investigation continues, we are continuing to gather more evidence in support of investment fraud allegations against GPB Capital Holdings and the brokerage firms that sold GPB private placements to accredited investors. If you have any information related to GPB Capital Holdings’ private placements or brokerage firms’ sales practices, we encourage you to contact us immediately. Once our investigation is complete, we are prepared to pursue all available causes of action related to GPB capital funds in FINRA arbitration and/or securities fraud litigation in federal district court.

About FINRA Arbitration

The Financial Industry Regulatory Authority shares responsibility for oversight of the consumer securities market in the United States. Among other things, FINRA provides an arbitration venue for investors to pursue fraud claims against their brokers. Though FINRA arbitration, investors can recover losses that result from fraudulent sales practices, including withholding material information, making unsuitable investment recommendations and engaging in conflict-of-interest transactions in order to generate excessive commissions.

About Securities Litigation

For investors whose claims are ineligible for FINRA arbitration, relief may be available through federal securities fraud litigation. Investors may need to file a lawsuit rather than filing for arbitration if: (i) their broker is not registered with FINRA; or, (ii) they have a claim directly against a securities issuer (such as GPB Capital Holdings) instead of a broker. While many securities fraud lawsuits take the form of class action litigation, accredited investors may individually suffer losses that are substantial enough to warrant single-plaintiff litigation.

Zamansky LLC is a Nationally-Recognized Investment Fraud Law Firm

Zamansky LLC is a leading securities fraud law firm located in the heart of Wall Street. Our attorneys have decades of experience representing investors in FINRA arbitration and securities fraud litigation involving the types of claims discussed above. If you have suffered losses as a result of fraud involving GPB Capital Holdings’ proprietary funds, we can help you recover the funds you need to restore your investment portfolio. Contact us today to discuss your investment in GPB Capital Holdings with one of our highly-experienced investment fraud attorneys.

Request a Free Case Evaluation for Your GPB Capital Losses at Zamansky, LLC

If you have suffered investment losses due to investing in a GPB Capital Holdings fund through a broker-dealer, we want to hear from you. To schedule a free and confidential case assessment with an investment fraud attorney at Zamansky, LLC, call us at 212-742-1414 or contact us online now.