GPB Capital Holdings LLC founder David Gentile and sales chief Jeff Schneider have been sentenced to seven years and six years in prison, respectively, according to a spokesperson for the U.S. Department of Justice. The penalization comes seven years after the high-risk private placement firm’s accounting shortfalls started being scrutinized.
The sentencing follows their conviction last August by a federal jury in Brooklyn, as previously reported by AltsWire. This trial revealed they had misled investors about the source of funds used for distributions and affected approximately 17,000 investors in New Jersey and across the United States.
Gentile, 58, was found guilty of five counts of fraud, and Schneider, 56, was convicted on three counts. The charges stemmed from their management of GPB Capital Holdings, a firm Gentile founded in 2013.
Prior to GPB, Gentile was a long-time accountant in Long Island, and Schneider was a broker-dealer executive and salesman.
Between 2013 and 2018, Schneider and affiliates raised more than $1.8 billion through the sales of unregistered, high-commission limited partnership interests in a series of eight alternative asset investment funds managed by GPB Capital and Gentile. The firm sold its high-cost private placements through a network of dozens of independent broker-dealers. These private placements frequently carried hefty commissions, sometimes as high as 10% for clients.
The scheme was mainly carried out through four of the eight funds managed by GPB Capital and Gentile, consisting of: GPB Automotive Portfolio LP; GPB Holdings LP; GPB Holdings II, LP; and GPB Waste Management LP (collectively, the GPB funds). Nearly $1.7 billion was invested in these four GPB funds.
According to the U.S. Attorney’s Office, when the performance of GPB’s funds lagged, Gentile and Schneider attempted to conceal the shortfalls using fraudulent, back-dated documents. Crucially, they paid investor distributions using capital from other investors, a hallmark of a Ponzi-like scheme. These manipulations reportedly helped drive sales of additional GPB funds to new investors via financial advisers.
Investors in GPB funds, which primarily invested in auto dealerships and trash hauling businesses with a targeted 8% annual return, have not received any money from the firm since 2018.
The unraveling of GPB began in 2018 when it became public that the company and its largest funds had failed to make timely required filings, including audited financial statements, with the U.S. Securities and Exchange Commission. This was followed by an FBI raid on GPB’s Manhattan offices in February 2019.
Two years later, in February 2021, the Justice Department, alongside the SEC, charged Gentile, Schneider, and another senior executive, Jeffrey Lash, with multiple fraud charges, including securities fraud, wire fraud, and conspiracy, and alleged the operation of a Ponzi-like scheme.
Also in 2021, the North American Securities Administrators Association reported that seven state securities agencies had filed regulatory actions against GPB Capital Holdings and others for their alleged involvement.
In a recent development last month, a federal judge in Brooklyn last month approved the release of $400 million to some of the beleaguered GPB Capital Holdings investors. It was also revealed over the winter that GPB Capital Holdings was underwriting $75 million in legal costs for Gentile and Schneider.
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