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Articles Tagged with GPB Automotive Fund

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As we previously reported, the SEC, FINRA, the FBI, and the State of Massachusetts are investigating GPB Capital Holdings LLC (“GPB”) related to the accuracy of GPB’s disclosures of financial information to its investors.  GPB, a New York asset management firm, focused on private placement investments, has been under investigation since September 2018. On October 23, 2019, GPB’s legal problems continued as the U.S. Department of Justice charged Michael Cohn, Chief Compliance Officer of GPB, with Obstruction of Justice related to the SEC investigation.  Mr. Cohn, who up until October 2018 worked at the SEC as an examiner, allegedly reviewed and took with him unauthorized significant and comprising information related to the SEC’s GPB investigation when he left the SEC to work for GPB. Additionally, throughout his tenure at GPB, Mr. Cohn allegedly would brag about his inside knowledge of the SEC GPB investigation to senior members of GPB.

Wastebasket Filled with Crumpled Dollar Bills
GPB and the broker-dealers that sold it to their clients have weathered a storm of bad news over the past year.  Public records show there are at least 80 broker-dealers that sold, or were authorized to sell investments for GPB.  As registered broker-dealers selling private placements, these companies were required to conduct their due diligence in investigating potential investments and making sure their clients understand the risks associated with each potential investment before investing their clients’ money in the investment.

The list of broker-dealers who sold or were authorized to sell GPB securities includes:

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Funds offered by GPB Capital Holdings LLC (“GPB”) have shown signs of distress for some time now.  First, it was reported that the U.S. Securities and Exchange Commission (“SEC”), Financial Industry Regulatory Authority (known as “FINRA”), the FBI, the State of Massachusetts, and the New York Business Integrity Commission are investigating GPB Capital Holdings LLC (“GPB”) for financial misconduct. Then one of GPB’s business partners, Prime Automotive Group in Massachusetts, accused GPB of serious financial misconduct and running a “Ponzi-like scheme”.

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Now, these problems have apparently come home to roost in the form of investor losses, as it was recently reported that GPB issued revised, lower valuations for two of its funds, GPB Holdings Fund II and GPB Automotive Fund.  The funds purportedly lost 25.4% and 39% of their value respectively.  Investors are left to guess whether this is the end of the losse, or whether GPB’s other funds including GPB Holdings LP, GPB Holdings III, GPB Waste Management, LP, and GPB NYC Development LP – will also lose value.

GPB is a New York-based alternative asset management firm whose business model is predicated on “acquiring income-producing private companies” across a number of industries including automotive, waste management, and middle market lending.   An issuer of private placements, GPB has raised $1.8 billion from accredited investors in funds that in turn invest in auto dealerships and the waste management industry.  Stockbrokers and advisors from dozens of brokerage and financial advisory firms sold the high risk, high-commission private placements, including GPB Automotive Portfolio, LP, and GPB Waste Management, LP.   According to SEC filings approximately 60 brokerage firms sold clients investments in various GPB Capital Funds.  However, the primary sellers of these toxic funds appear to have been Royal Alliance, FSC Securities, SagePoint Financial, and Woodbury Financial Services.