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Massachusetts Brings Action Against GPB Capital For Fraud

On May 27, 2020, the State of Massachusetts filed a complaint alleging that the state “seeks to prevent further financial harm and provide relief to Massachusetts residents who were defrauded by GPB Capital.” The claim alleges that GPB was sold to investors “under false and misleading pretenses…and without knowing that GPB Capital continually engaged in self-dealing from inception.” The State of Massachusetts made claims confirming many of the allegations stated within this complaint.

The State of Massachusetts complaint echoes many of the allegations clients of our firm have been asserting in FINRA arbitration. One of the allegations Massachusetts makes concerns materially false statements GPB Capital made to investors concerning the source of funds to pay the 8% distributions the funds promised investors. As stated in some of the offering documents, “[c]apital preservation and income generation are foremost in GPB’s principals’ minds when structuring an acquisition. They are always mindful of the importance of preserving investor capital and returning it in a timely fashion, with the preferred return.” GPB Automotive Portfolio, LP, PPM, pg. 16 (Dec. 2016). GPB Capital promised investors: “[a]t the core of the GPB strategy is the provision that all distributions paid to limited partners will be fully covered by funds from the portfolio company’s operations.” GPB Holdings, LP PPM, pg. 13, (Feb. 20, 2014).

Our firm has alleged on behalf of investors that brokerage firms failed to investigate GPB Capital’s claims like this to determine whether or not distributions were paid from operations. In fact, GPB Capital’s distribution claims were false and the majority of funds paid to investors was merely a return of capital, or really capital raised from other investors. For example, a review of the audits provided for GPB Automotive Portfolio in 2016 shows distributions totaling $14,339,241 to investors but an operating loss of $7.1 million for the year. Clearly distributions to investors had to come from a repayment of capital and not from operating profits. GPB Capital’s payment of distributions from investor capital was in stark contrast to the above-referenced disclosures, and should have raised “red flags” with brokerage firm’s due diligence departments.

GPB Capital’s false distribution claims is only one of many misleading statements and other “red flags” our firm has uncovered in the course of our investigation of these offerings.

Our attorneys represent over 50 victims who have been recommended GPB Capital Holdings (GPB Capital) related investments. GPB claims to invest in a variety of businesses including auto dealerships, waste management, cold storage, life sciences, and real estate businesses. The firm continues to be unable to account for how it used $1.5 billion in investor funds and investors at this point should prepare themselves for the worst possible outcomes including near complete losses on their investments. Investors who have invested in GPB Capital are encouraged to contact us for a free consultation.

GPB Capital Holding’s funds include:

  • GPB Cold Storage
  • GPB Automotive Fund
  • GPB Automotive Income
  • GPB Holdings II and III
  • GPB Waste Management
  • GPB NY Development

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client after conducting due diligence. Due diligence includes an investigation into the investment’s properties including its benefits, risks, tax consequences, issuer, history, and other relevant factors. In particular, due diligence on private placements is of the utmost importance because there is no publicly available information on this companies and businesses and the only access to material information comes from the brokerage firm.

Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.

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