The founder of a New York money manager and two associates were criminally charged on Thursday with running a $1.8 billion Ponzi-like fraud where thousands of victims were falsely promised steady returns on their investments.
David Gentile, the chief executive of GPB Capital Holdings LLC, was accused of cheating more than 17,000 retail investors taken in by promises of consistent 8.0 per cent annual returns even as the firm was hemorrhaging losses.
Authorities said Manhattan-based GPB told investors their payments would be funded by revenue from the firm’s holdings, including a group of car dealerships, when in fact a “significant” portion came from money from newer investors, reports Reuters.
The defendants also allegedly siphoned millions of dollars for themselves, including for luxuries such as a Ferrari for Gentile and a $29,837 American Express bill covering “David’s 50th Bday.”
Gentile, 54, who founded GPB in 2013, lives in Manhasset, New York.
Also charged were former GPB managing partner Jeffrey Lash, 51, of Naples, Florida; and Jeffry Schneider, 52, of Austin, Texas, who owned GPB’s placement agent Ascendant Capital LLC.
Each was charged with securities fraud and conspiracy, and Gentile and Lash were also charged with wire fraud.
Related civil charges were filed by New York Attorney General Letitia James, who said victims lost more than $700 million, and several other federal and state regulators.
A complaint from the US Securities and Exchange Commission included accusations that GPB silenced a known whistleblower and forbade former employees from speaking to the agency.
In a statement, GPB denied the allegations and said it intends to defend itself.
“GPB has been cooperating with government investigations and is extremely disappointed by these developments,” it added.
Gentile’s lawyer had no immediate comment. Schneider’s lawyer could not be reached. Lash’s lawyer Robert Gottlieb said his client will plead not guilty. “Mr. Lash is a good man with a spotless record,” he said.
According to court papers, GPB claimed to manage just $239 million as of December, despite raising the $1.8 billion.