Manhasset finance CEO accused of $1.7B fraud

0
Manhasset finance CEO accused of $1.7B fraud
David Gentile of Manhasset has been accused of defrauding thousands of investors in a Ponzi-like scheme. (Photo via Crunchbase)

A CEO of a prominent alternative asset management firm and a Manhasset resident has been accused of defrauding thousands of investors in a Ponzi-like fraud scheme that raised over $1.7 billion by the Securities and Exchange Commission, the U.S. Attorney’s Office of the Eastern District of New York has announced.

David Gentile, who founded and served as CEO of alternative asset management firm GPB Capital Holdings LLC, was charged on Feb. 4 with charged with engaging in a scheme to defraud investors by misrepresenting the source of funds used to make monthly distribution payments to them and the amount of revenue generated by two of his company’s investment funds.

Charged along with Gentile were former GPB managing partner Jeffrey Lash of Naples, Fla., and GPB Capital’s placement agent Ascendant Capital owner and CEO Jeffrey Schneider of Austin, Texas.

The SEC’s complaint alleges that Gentile and Schneider lied to investors about the source of money used to make an 8 percent annualized distribution payment to investors.  According to the complaint, the two men, along with Ascendant Alternative Strategies, which marketed GPB Capital’s investments, told investors that the distribution payments were paid exclusively with monies generated by GPB Capital’s portfolio companies.

“As alleged, GPB Capital actually used investor money to pay portions of the annualized 8% distribution payments,” the SEC said in a statement. “[They] also allegedly manipulated the financial statements of certain limited partnership funds managed by GPB Capital 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.”

Further, the complaint further alleges that GPB Capital and Ascendant Capital made misrepresentations to investors about millions of dollars in fees and other compensation received by Gentile and Schneider in a scheme that lasted for four years, and that the company violated whistleblower provisions of the securities laws by allegedly retaliating against a known whistleblower.

“Despite the company’s representations, investor capital was used to pay for a significant portion of the distributions made to investors in each of these funds,” a statement from the U.S. Attorney’s office said. “Gentile and Schneider were aware that the GPB Funds were underperforming, and authorized repeated distribution payments that used investor funds to cover income shortfalls, to the detriment of investors.”

“As alleged in our complaint, the defendants told investors that they would be paid distributions from profits of the portfolio companies when, in reality, many of the payments were being made from the investors’ own funds,” said Richard Best, director of the SEC’s New York Regional Office.  “This action shows our continued pursuit of those who deceive investors and conceal their misconduct to reap profits for themselves.”

William F. Sweeney, Jr., assistant director-in-charge of the Federal Bureau of Investigation’s New York Field Office,

“As alleged, the defendants misrepresented the holdings of GPB Capital through deceptive marketing practices, luring investors with promises of monthly distributions that would be covered by funds from the investments and not drawn from underlying invested capital. As we allege today, however, this was all a lie,” Sweeney said in a statement. “In truth, a significant portion of GPB’s distributions were paid directly from investor funds. Investment fraud schemes are not only problematic for the victims they claim, but for the overall investing public who loses faith in a free-market system every time they hear of crimes like this. Along with our partners, we’re committed to exposing these frauds whenever and wherever we find them – and holding the fraudsters accountable.”

Gentile, Lash and Schneider are charged with wire fraud and securities fraud. If convicted, they each face up to 20 years’ imprisonment.

No posts to display