GPB Capital Holdings is being investigated by the state of Massachusetts, FINRA, the SEC, the New Jersey Bureau of Securities, and the FBI. If that weren’t enough, the New York City Business Integrity Commission, which oversees the city’s private trash industry, is also investigating the company.
The company says it buys “income-producing private companies” with the money it raises by having financial advisers sell private placements to investors. A private placement is a way to raise funding by selling securities to investors in a private, rather than a public, offering. Private placements involve significant risk, are illiquid, and are not suitable for many investors’ goals.
GPB Capital Holdings has raised over $1.8 billion through registered representatives from independent broker-dealers selling these risky, high-commission private placements as “alternative investments.” In August, 2018 the company suspended new fundraising.
Trash Hauling Trouble
Many of GPB’s investments are in auto dealerships and private trash hauling companies. One trash hauling company that GPB acquired in 2017 is called Five Star Carting. A March ProPublica article about Five Star and the investigations into GPB raised alarms about what’s going on at the company.
According to ProPublica, Five Star Carting (now known as GPB Waste NY) is the third-biggest trash hauler in New York City. The company has had a troubled labor and safety record. Government inspections found unsafe trucks with faulty steering and brakes. And the company settled a class-action lawsuit for $400,000 related to wages.
GPB Capital’s director of waste strategy is a former president and COO of Waste Management named Rod Proto, who was fired from the company in 1999. Subsequently, the SEC charged him with insider trading.
GPB Offices Raided By FBI
GPB has been the subject of investigations regarding the accuracy of its disclosures to investors. On February 28, 2019, GPB’s offices were raided by the FBI, but it’s not clear if the raid was about the disclosures or other issues because the authorities don’t comment on ongoing investigations.
Scott Silver, managing partner of Silver Law Group, has spoken to many investors who bought GPB. Speaking to InvestmentNews.com, he voiced concerns about the due diligence and compliance at firms selling GPB’s private placements, saying “With these illiquid products like private placements, the advisers sometimes don’t know, truly what is internally in the assets. They see a high commission and the broker-dealers tells them the due diligence has been completed. But did the due diligence committees and the firms really understand where the money was being invested?”
If you purchased GPB Capital through Sagepoint Financial or another broker-dealer, you may have a claim to recover your money.
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