Securities Arbitration Lawyers BlogGPB Capital Sued By Business Partner, Accused Of “Serious Financial Misconduct”
GPB Capital Holdings is being sued by one of its business partners, David Rosenberg, for allegations of financial misconduct. According to the lawsuit, Rosenberg is the chief executive of Prime Automotive Group. In 2017, he sold a majority stake in the company to GPB for $235 million. Rosenberg’s lawsuit accuses GPB of running like a Ponzi scheme by using investor’s money to pay other investors. He also alleges that GPB tried to force him out after he complained about their behavior to the SEC.
An attorney for GPB told the Boston Globe “This is a simple contractual issue between Mr. Rosenberg and the defendants. The remaining allegations are inflammatory and not relevant to the action…”
GPB calls itself an alternative asset management company. Their business model was to raise money by selling private placements in their funds, use that money to buy automotive dealerships and waste management companies, and generate a return for itself and investors.
Since 2013, GPB raised between $1.5 and $1.8 billion. They used broker-dealers such as SagePoint Financial to raise that money by selling private placements to investors, for which they were paid high commissions. Silver Law Group has been retained by multiple investors to pursue claims against the selling broker-dealers for damages relating to the sale of GPB Capital notes.
Serious Issues At GPB
Though a private placement in GPB was illiquid, investors were lured in by the high monthly distributions they paid. Unfortunately, GPB stopped paying distributions in December 2018. GPB now claims that many investors have already received a return of some of their principal because the dividends were not from the profits earned by GPB but a return of capital by GPB after it took out commissions, fees costs and other expenses.
In March 2019, the company’s offices were raided by the FBI. The SEC, FINRA, and New York’s Business Integrity Commission are also investigating, and GPB has missed a deadline to submit its audited financial statements by more than a year. This newest lawsuit is the most recent in a long list of problems plaguing the company.
Many brokerage firms are trying to distance themselves from the deal claiming that investors should have known that the investment was speculative or high risk. However, investors counter this is illogical since GPB was promoted as paying a dividend and not as an investment which could potentially produce a substantial return.
GPB Funds Decline Significantly In Value
If the other problems weren’t enough, in June 2019 GPB reported that the value of its two biggest investment funds, GPB Holdings II and GPB Automotive Portfolio, had declined by 25% and 39%, respectively.
The company says its other five funds also have significant declines in value. Even at the reduced valuations, GPB investors have no one to sell to and are forced to hold and risk further reductions in price.
Silver Law Group Represents Investors In Claims Against Brokerage Firms to Recovering GPB Losses
If you purchased GPB Capital, you may have a claim to recover your money. Broker-dealers have an obligation to recommend suitable investments to their clients and perform due diligence into the products they sell them. FINRA-registered brokers and firms are subject to arbitration to resolve securities-related disputes.
Silver Law Group has filed arbitration claims against broker-dealers who sold GPB, including SagePoint Financial.
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. Please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.