Investment firm execs charged with defrauding investors

They allegedly 'robbed Peter to pay Paul'

February 4, 2021 Brooklyn Eagle Staff

The federal prosecutor’s office for the Eastern District of New York is within the old General Post Office building, 271 Cadman Plaza East. Google Maps photo

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Three executives of the investment firm GPB Capital Holdings were charged on Thursday with securities fraud, wire fraud and conspiracy, in a complaint unsealed at Brooklyn Federal Court.

Defendants David Gentile, the founder, owner and CEO of GPB; Jeffry Schneider, the owner and CEO of Ascendant Capital LLC; and Jeffrey Lash, a former managing partner of GPB, are 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 GPB’s investment funds,

GPB, founded by Gentile around 2013, was a New York-based investment advisor registered with the SEC. GPB served as the general partner of several investment funds, including GPB Holdings, GPB Holding II, GPB Automotive Portfolio, GPB Waste Management and GPB Cold Storage. The business of GPB Capital was to manage the GPB Funds, which raised and invested capital in a portfolio of private equity investments.

Gentile and Schneider worked closely together on the founding, development, operation and marketing of the GPB Funds. From 2013 through early 2018, Lash was responsible for overseeing the GPB Funds’ investments in car dealerships, which made up a sizable percentage of GPB’s portfolio companies.

Between August 2015 and December 2018. Gentile and Schneider, both individually and through employees at Ascendant, told investors in Holdings I, Holdings II and Automotive Portfolio that the GPB funds would make a monthly distribution payment to investors that would be fully covered by funds from operations In reality, however, investor capital was used to pay for a significant portion of the distributions made to investors in each of these funds.

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 obvious detriment of investors, according to the U.S. Attorney’s Office.

The defendants were arrested Thursday. Gentile appeared in federal court in Boston, Schneider appeared in federal court in Austin, Texas, and Lash appeared in federal court in Fort Myers, Florida.

Seth D. DuCharme, acting United States Attorney for the Eastern District of New York, said, “As alleged, by paying investors from an undisclosed and improper source such as investor capital, the defendants repeatedly misled investors about the health and performance of their investments. This office is committed to ensuring honesty and integrity in the management of investment funds.”

“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,” said William F. Sweeney, assistant director in charge of the FBI.