Money Manager Accused of Running a $1.7 Billion ‘Ponzi Scheme’
A New York money manager is facing charges of conspiracy and fraud. Authorities say he was running a 1.8 billion dollar fraud operation in which he defrauded investors in what they have called a Ponzi-like scheme.
David Gentile, 54, of New York was the chief executive of GPB Capital Holdings LLC, a company which he founded in 2013. Gentile's two associates, Jeffrey Lash, 51, from Naples Florida, and Jeffrey Schneider, 52, from Austin, Texas, are also entangled in the scheme. All three individuals face charges of securities fraud and conspiracy. Both Gentile and Lash are also facing an additional charge of wire fraud. Lash was a former managing partner of GPB Capital Holdings, and Schneider was the CEO and owner of Ascendant Capital LLC. With Gentile as the ringleader, authorities alleged he and his associates ran the scheme for at least four years from August 2015 until December 2018.
The acting United States Attorney Seth D. DuCharme announced the charges stating that Gentile was "paying investors from an undisclosed and improper source such as investor capital" and that Gentile and his associates "repeatedly misled investors about the health and performance of their investments.”
The fraudulent scheme impacted at least 17,000 retail investors. Gentile and his associates promised an 8% guaranteed annual return to their investors, despite the fact that the company was not producing any gains. Investors were told that their returns would come from different holdings including a car dealership. In actuality, The firm was seeking out new investors and paying out returns with money provided by new investors. In total, the firm secured roughly 1.8 billion dollars in investments but managed only 239 million as of December.
DuCharme explains, “The defendants misrepresented the holdings of GPB Capital through deceptive marketing practices, luring investors with promises of monthly distributions that would be covered by funds from the investments and not drawn from underlying invested capital."
Gentile and his associates are also accused of using investor funds to support their lavish lifestyles. One American Express bill of just under $30,000 covered expenses for what was noted as "David's 50th birthday.” Another $355,000 purchase was made for a Ferrari FF for Gentile's personal use. Reports show that GPB sold the Ferrari and incurred a $183,000 loss at the expense of investors.
Several state regulators along with the U.S. Securities and Exchange Commission filed civil charges that accused GPB of trying to silence individuals who were aware of the fraudulent behavior. For example, some employees were not allowed to cooperate with the agency per contractual requirements.
New York's Attorney General Letitia James says that investors were defrauded over $700 million. In a statement James shares, “We won’t let Wall Street fat cats get away with breaking the rules.”
If convicted Gentile and his associates could face up to 20 years behind bars.
