Silver Law Group has filed a FINRA arbitration claim against Kalos Capital, Inc. (CRD# 44337) regarding broker Eric Weschke (CRD# 3486324) and losses our client suffered by investing in GPB Capital Holdings.
Eric Weschke has been in the industry since 1994, and works out of Setauket, New York. Before joining Kalos in 2011, Weschke was registered with Harrison Douglas, Inc. (CRD# 16515), Alternative Wealth Strategies (CRD#130933), Equity Services, Inc. (CRD# 265), Self Trading Securities, Inc. (CRD# 38439), and Tasin & Company, Inc. (CRD# 30709).
Weschke has 16 disclosures on his publicly-available FINRA BrokerCheck report, including 14 customer disputes and 2 regulatory disclosures. Many of the customer disputes on Weschke’s record, which go back as far as 1998, include allegations of unsuitable investments.
Eric Weschke, Kalos Capital Free Dinner
According to the statement of claim, our client met Eric Weschke at a retirement seminar and free dinner on Long Island that was sponsored by Kalos Capital and Eric Weschke. (Silver Law Group has had numerous clients whose unfruitful relationship with a broker started with a free meal or seminar.)
After the dinner, Weschke came to our client’s home and convinced him to transfer his IRA to Kalos Capital. Weschke said he could preserve our client’s capital and provide income with alternative investments that were suitable for a retiree.
Our client was sold numerous investments that he did not understand but was told were safe and would provide good income. He did not know that the investments were illiquid, risky, or that Weschke and Kalos were earning massive commissions of 8-12% for selling them to him.
GPB Capital Holdings Investment
Weschke recommended that our client invest more than 25% of his portfolio in private placements with a company called GPB Capital Holdings.
GPB Capital Holdings is a New York-based alternative asset investment firm that raised capital by having brokerage firms like Kalos Capital and SagePoint Financial sell private placement investments. Since its founding in 2013 by Scientologist David Gentile, GPB capital raised $1.8 billion, which it used to invest in auto dealerships, a waste management company, and other businesses.
Private placements like GPB are unregistered securities that are issued and sold privately and not registered with the Securities and Exchange Commission (SEC). Because private placements are unregistered, they are not subject to many of the disclosure requirements and regulations that SEC-registered securities are subject to, and are therefore at greater risk of fraud. Private placements are also illiquid, meaning they can’t be sold easily.
Our client believed that GPB was a secure investment that would pay him an 8% dividend for many years to come, not a fraud. He believed that Weschke and Kalos Capital had performed adequate due diligence into GPB before selling it to him, which they were required to do under FINRA Rules.
Our statement of claim states that our client relied on Kalos (Respondent) and Weschke because they were “in the best position and with the most resources to ascertain the financial viability of GPB. Further, Respondent was paid a commission to determine whether or not GPB and its manager were credible, legitimate, and suitable entities. Had Respondent conducted adequate due diligence on GPB, it would have discovered significant issues concerning the assets purportedly owned and managed and that there were serious misstatements of financials and other reports…”
GPB Goes Downhill
Our client’s investment in GPB Capital soon became a nightmare. GPB stopped paying dividends in 2018. In February, 2019 its offices were raided by the FBI. The company is the subject of a class action lawsuit, and one of its partners has accused the company of operating like a Ponzi scheme.
In June, 2019 GPB announced that its two biggest funds, GPB Holdings II and GPB Automotive, had declined in value by 25% and 39%. The company is subject of investigations by the FBI, SEC, and New York City’s Business Integrity Commission. In October, 2019, GPB’s Chief Compliance Officer was indicted on obstruction of justice charges.
Recovering GPB Losses
Because of GPB’s illiquid nature, investors have no choice but to hold and risk a further decline in the value of their investment. When it comes to recovering their investment losses, the class action lawsuits may not be fruitful. If the company is really a Ponzi scheme, then it won’t have the money to pay victims.
That’s why Silver Law Group is filing FINRA arbitration claims against the broker-dealers who sold GPB to their clients. When their misconduct, such as lack of due diligence, causes investor losses, they are responsible for those losses. FINRA arbitration panels can award investors financial damages without the time and expense of going to court. And the broker-dealers we file claims against have the money to pay, which GPB may not.
Do You Have Investment Losses With Eric Weschke, Kalos Capital, Or GPB Capital?
If you or someone you know lost money investing Eric Weschke, Kalos Capital, or GPB Capital, please contact contact Scott Silver of the Silver Law Group for a free consultation at firstname.lastname@example.org or toll free at (800) 975-4345.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. Scott Silver is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and represents investors nationwide in securities investment fraud cases.