SEC Files Charges Related to Alleged $1.7 Billion GPB Capital Ponzi-Like Scheme

In February 2021, the U.S. Securities and Exchange Commission (SEC) announced charges against multiple individuals and entities related to an alleged “Ponzi-like scheme” that raised approximately $1.7 billion from more than 17,000 individual investors. Here, financial fraud attorney Jake Zamansky discusses the allegations and the steps that investors can take to recover their losses after falling victim to investment fraud scams.

GPB Capital, Its CEO, and Others Accused of Massive Fraud

According to the SEC’s Press Release, GPB Capital, its CEO and others are accused of, “l[ying] to investors about the source of money used to make an 8% annualized distribution payment.” The SEC alleges that the defendants told investors that these distribution payments were funded by investment returns when GPB Capital actually paid investors using their own money. The SEC also alleges that the defendants manipulated the financial statements of various funds in order to, “perpetuate the deception by giving the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it actually was.”

Additional allegations set forth in the SEC’s Complaint include:

• GPB Capital and its placement agent, Ascendant Capital, made misrepresentations about millions of dollars in fees and other compensation;
• The defendants failed to deliver audited financial statements to investors while continuing to falsely represent the source of their distribution payments;
• GBP Capital failed to register two of its funds with the SEC; and,
• GPB Capital violated federal whistleblower protections by including impermissible language in termination and separation agreements and by retaliating against a known whistleblower.

Based on these allegations, the defendants are facing charges under statutes including the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940.

How Investors Can Spot and React to Instances of Investment Fraud

While investment fraud scams are becoming increasingly sophisticated, there are steps that investors can take to identify fraudulent practices and protect their investments. For example, while GPB Capital investors may have had no way of knowing that the source of their distribution payments was being forged, it appears that the firm’s failure to provide audited financial statements should have been a red flag. There are various other ways to spot investment fraud as well, though investors can be forgiven for falling victim to complex investment fraud schemes.

For investors who have concerns about investment fraud, it is imperative to seek help as soon as possible. Even if the SEC files charges, this does not necessarily mean that investors will receive restitution. In order to recover their losses, defrauded investors must file claims in FINRA arbitration or securities litigation, and in order to do so, they must promptly engage an experienced financial fraud attorney.

Speak with a Financial Fraud Attorney at Zamansky LLC

Are you concerned that you may be a victim of investment fraud? If so, we urge you to contact us right away. To speak with a financial fraud attorney at Zamansky LLC in confidence, call 212-742-1414 or request a free consultation online now.