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Long Island resident David Gentile, age 54, of Manhasset, the founder, owner, and CEO of GPB Capital Holdings, was charged with two others for scheming to defraud investors by misrepresenting the source of funds used to make monthly distribution payments to them, federal officials said.
Specifically, the three were charged with securities and wire fraud, as well as conspiracy.
Acting U.S. Attorney Seth DuCharme said that Gentile, Jeffry Schneider, the owner and CEO of Ascendant Capital, and Jeffrey Lash, a former managing partner of GPB were all in on the scam, which targeted victims throughout the country.
“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,” DuCharme said.
GPB, which was founded by Gentile in 2013, served as the general partner for several large investment funds. GPB would then manage those funds by investing in a portfolio of private equity investments.
Gentile and Schneider worked on developing and marketing, while Lash was responsible for overseeing the GPB Funds’ investments in car dealerships, which made up a sizable percentage of GPB’s portfolio companies through 2018.
It is alleged that between August 2015 and December 2018, the three defrauded investors and potential investors through misrepresentations and omissions.
DuCharme said that Gentile and Schneider represented to investors that the GPB funds would make a monthly distribution payment to investors that would be fully covered by funds from operations, meaning that the companies purchased by the funds would be sufficiently profitable for the monthly payments to be made from the companies’ cash flow, without drawing from capital raised by investors.
In truth, investor capital was used to pay for a “significant” portion of the distributions made to investors in each of these frauds. It is alleged that Gentile and Schneider were both aware the funds were underperforming and authorized repeated distribution payments that used investor funds to cover income shortfalls, to the obvious detriment of investors.
“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,” FBI Assistant Director-in-Charge William Sweeney said.
“As we allege today, however, this was all a lie. In truth, a significant portion of GPB’s distributions was paid directly from investor funds.
If they are found guilty, Gentile, Lash, age 51, of Naples, Florida, and Schneider, age 53, of Austin, Texas, all face up to 20 years in prison.
Sweeney added: “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.”
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