J. Swift
Well-known member
The 2021 SEC Form ADV for GPB Capital Holdings, LLC was recently released. The numbers tell the story of hundreds of million of dollars lost. It is also clear that Scientologist and criminal defendant David Gentile’s massive Ponzi scheme is being wound down by GPB Capital’s operating arm Highline Management with the approval of court-appointed monitor Joseph Gardemal III.
Like the Titanic, the colossal wreckage of GPB Capital Holdings is slowly sinking beneath the waves as its various holdings are being sold off and its architects are headed to a US Federal criminal trial. What, if anything, can the investors hope to recover? The answer is that no one can say at present. It will likely take years of litigation before that question can finally be answered.
GPB Capital’s 2021 Form ADV was recently published; please scroll down to read it and/or download it for your records. The ADV states that the firm has $1,218,600,173 Assets Under Management (AUM). This is a >$500 million loss from the almost $1.8 billion raised from 17,000 investors. We now know that GPB Capital’s investors lost 12% right off the top in undisclosed and hidden fees paid to Gentile and Schneider as well as high commissions paid to GPB’s Broker-Dealers.
The high commissions were a definite inducement from GPB’s placement agent Jeffry Schneider to his Broker-Dealer network to preferentially sell GPB Capital’s funds over other lower-commission funds. As we cover, the high commissions came back to haunt GPB’s B-D’s.
With $1.8 billion in investment dollars, the hidden fees and high commissions cost investors a staggering $216 million, or more, when they first invested money in GPB Capital. This criminal plunder is an outrage conducted by the now-indicted conmen David Gentile and Jeffry Schneider. The hidden fees paid for the luxury living of these two grifters who will, predictively, exchange their mansions for prison cells in the near future.
In 2020, GPB Capital’s AUM was stated as $238,637,198 . This low number was due to the evasive tactics used by David Gentile in which he claimed that most of GPB’s assets were in funds that counted as Registered Assets Under Management (RAUM) and were therefore not subject to disclosure.
It was only after Gentile and Schneider were indicted, arrested, booked, and released on bond that their accounting games and refusal to file mandatory SEC filings stopped. The court-appointed monitor stepped in, took over the company, and put an end to the systemic concealment of fraud by Gentile and Schneider.
As alleged in the complaint by the Commonwealth of Massachusetts and other lawsuits, Gentile and Schneider used shell companies and other concealments and evasions as ways of hiding the enormous profits they reaped and the losses they inflicted upon GPB’s investors.
GPB Capital sold 28 of the 29 car dealerships in its Automotive Portfolio to Group 1. Initially reported as an $880 million sale, the final sale amount was $854.2 million.
When this sale is deducted from the $1.2 billion shown in GPB’s 2021 ADV, the firm’s AUM is reduced to $364 million. This is how small GPB Capital is at present.
More significantly, the sale of the Automotive Portfolio means that GPB Capital has now lost its main source of profits and income. All of the Automotive cash flow is gone. GPB Capital must now fund its operations and legal defense from its own dwindling cash pile — and this includes cash from the sale of the Automotive Fund.
The outlook for GPB Capital’s investors is not good:
- GPB Capital still faces a civil lawsuit filed by the US Securities and Exchange Commission. This is in addition to the lawsuits filed by the States of New York, Massachusetts, Illinois, Alabama, Georgia, New Jersey, Missouri, and South Carolina. These civil suits have been stayed during the pendency of the criminal trial against co-defendants David Gentile, Jeffry Schneider, and Jeff Lash. The SEC and State lawsuits seek to recover damages on behalf of investors. The costs of defending these lawsuits, or even settling them, will be an enormous drain on what remains of GPB’s cash.
2. Maddeningly, GPB Capital Holdings is obligated to use investor money to pay for the criminal defense of Gentile, Lash, and Schneider. This obligation, buried in the fine print, was a condition most investors unknowingly agreed to when they invested and signed the papers. This should serve as a serious warning to consult with an attorney to review contracts before making any significant financial investment.Investors should also use the FINRA Broker Check to look at the broker’s history before giving a broker any money. A quick FINRA check of Jeffry Schneider would have shown a checkered history of disciplinary actions against this conman who is now indicted. In 2021, FINRA moved against Schneider and revoked his license. FINRA Broker Check says of Schneider:
3. In order to sell its Automotive Portfolio, GPB Capital had to pay former GPB Automotive CEO David Rosenberg $30 million to settle his lawsuit against GPB’s Automotive Fund. The is another $30 million in investor money gone due to David Gentile’s stupid and obstinate refusal to pay Rosenberg the $5.9 million in options to which he was contractually entitled.
David Rosenberg did the right thing several years ago by reporting the illegal internal financial conduct of David Gentile and Jeffry Schneider to the SEC. When Rosenberg bluntly informed David Gentile of his reporting GPB Capital to the SEC, Gentile retaliated by firing Rosenberg.
4. As a condition of the GPB Automotive sale, $45 million was immediately placed into an escrow account to indemnify the purchaser Group 1 against any unforeseen post-closing liabilities:
- Patrick Dibre was the first person to publicly call out GPB Capital Holdings as a Ponzi scheme in his lawsuit against the firm.
- Patrick Dibre was the first person to openly take on the mobbed-up Sicilian madman David Gentile in a bare-knuckle legal fight.
7. GPB Capital’s Broker-Dealers can file lawsuits against GPB Capital, Jeffry Schneider, and David Gentile to recover their losses in FINRA arbitrations. However, there are most likely arbitration agreements in place to prevent the Broker-Dealer’s from suing GPB and its principals. Could these arbitration agreements become invalid due to fraud? As it stands, overturning an agreement to arbitrate due to fraud is actually a quite complex legal matter.
Not being a lawyer, your humble correspondent would need a lawyer to discuss this matter. We do note that in Markowits v Friedman, 2016 NY Slip Op 07932 (2d Dep’t Decided on November 23, 2016), the court stated:
The Bottom Line: Arbitration has become the crack cocaine of courts, cults, corporations, and criminal enterprises.
It is clear that GPB Capital is being wound down and its assets sold off:
* A 40 acre parcel of land in the Port of Newark owned by GPB Cold Storage was recently sold, or “offloaded” according to one report. GPB’s CEO Rob Chmiel stated in a recent press release that the money from the sale will be distributed to GPB Cold Storage investors. However, if the $78 million valuation for this parcel is correct, the price would be reduced by a reported $15 million dollar remediation required as the site once served as a landfill.
GPB Cold Storage would have had to pay for a full scientific site study that sampled, characterized, and mapped the full extent of the soil and groundwater contamination before it could sell the property. Contaminated properties have to be sold at a greatly reduced price which allows the buyer to pay for remediation — and remediation can take years depending upon the extent and type of contaminants — and still turn a profit on the land years later.
* GPB Automotive’s one remaining dealership, a Subaru lot, is to be sold off. There are certain conditions that must be met before this dealership is sold. However, it is correct to state that GPB Automotive is effectively out of business. GPB Capital once boasted, and correctly so, that it was in the Top 10 of automotive dealerships in the US. Now it can only sell you a Subaru.
* As reported by the New York Times Pro Private Equity, GPB Capital sold its Alliance Physical Therapy healthcare component to “Chicago-based healthcare investment firm Beecken Petty O’Keefe & Co., which does business as BPOC.”
* As reported by ProPublica, GPB Capital’s Waste Management Portfolio, located in New York City, was riven with serious problems and conflicts. Our opinion is that GPB’s Waste Management Portfolio was a complete dumpster fire that lost 80% of its value. This loss was in excess of $70 million according to our research.
In our view, it seems that most of the Waste Management Portfolio money likely went into the pockets of organized crime. We say this because it is impossible to lose 80% hauling trash in NYC unless a) One is utterly incompetent to run a business, or, b) The mob is plundering the operation. We think the mob was involved because the FBI — along with the New York City Business Integrity Commission — raided GPB’s Five Star Carting corporate office. This was concurrent with the FBI’s raid on GPB Capital’s corporate office on Long Island. We cannot comment further on what our sources have told us.
The New York Times stated the present situation for GPB’s investors:
The SEC’s lawsuit against GPB Capital states:
GPB Capital’s investors are stuck in an impossible place. These poor souls cannot get any of their money back; cannot sell their investment at a loss; and have not received any distributions since 2018. Their only good strategy is to contact a law firm that specializes in securities fraud and go forward with a FINRA arbitration against GPB Capital. Investors have six years to file in order to protect their rights.
Until the final accounting is done years from now, no one knows how much investor money GPB Capital swindled; squandered; lost in bad deals; wasted on sweetheart deals made with Gentile’s fellow Scientologists and shady pals; paid to organized crime; and spent on massive legal fees. The losses are in the hundreds of millions of dollars at present and will continue to climb due to financial fines and penalties; criminal and civil forfeitures; and the many lawsuits that go to trial or are settled.
Four questions that remain outstanding:
1. A leaked FBI memo stated that an informed source said $100 million in Russian mob money was deposited into a US private equity fund. Was this fund GPB Capital?
2. Did the $103 million dollars spent by Scientologist-owned LLC's to make real estate purchases in Clearwater come from GPB Capital? Was it the Russian mob money mentioned in the leaked FBI memo?
3. Many of these Clearwater land purchases made by Scientologist were made at as much as 5X over market prices. This was like play money spent on real estate that offered no return on investment. Who has $103 million to waste in that way?
4. Coincident with these land purchases, Scientologist Larry Feldman's Riverwalk project in Tampa was suddenly cancelled. GPB Capital had publicly stated that it would fund the project with $70 - $105 million. If Riverwalk was cancelled, this freed up money for other land purchases. Did David Gentile divert the money to Itzhak Zano's LLC's and the other LLC's owned by Scientologists? Our previous reporting on the Riverwalk cancellation showed a personal relationship between David Gentile and Larry Feldman:
A July 2018 article in Business Observer informed readers that GPB Capital Holdings had committed to fund the launch of the 53 story condo project in Tampa:
In this same article, Larry Feldman praised his partners at GPB Capital Holdings. Feldman did so without disclosing that he was a Scientologist as were GPB’s CEO David Gentile and then Managing Director Manuel Vianna. Feldman:
GPB Capitals' involvement came to light in April, when Feldman and Two Roads unveiled a long-awaited Gensler design for the $350 million tower. Two Roads joined the project officially as its residential developer a month earlier.
Last edited:
