What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: August 5, 2020

Chicago-based securities law firm Stoltmann Law Offices continues to represent investors in FINRA arbitrations nationwide recovering losses suffered in the GPB Capital Holdings group of funds, including the GPB Automotive Fund, GPB Holdings Fund II, and the GPB/Armada Waste Management Fund.

One of the appealing pitches that broker-dealers and investment advisers offer is the opportunity to invest in private companies with outstanding earnings potential, or in the case of GPB, relatively high annualized “interest” payments. Instead of buying shares in public companies on stock exchanges, the advisers sell interests in “closely held” companies, which are not listed on exchanges and not required to openly disclose their financial statements.

One such company was GPB Capital Holdings LLC, which has been the subject of federal and state litigation. GPB Capital is a New York City-based alternative investing firm that “seeks to acquire income-producing private companies.” So-called private placements have posed problems for investors in recent years because of sketchy financial disclosure and overselling.

Two years ago, William Galvin, Massachusetts’s chief securities regulator, began a probe into GPB’s finances and marketing practices.  Galvin focused on 63 broker-dealers who were selling GPB private placements. Several funds sold by the company reported large losses, which have stung investors all across the country.

The major problem for clients is accurate valuation of private placements, which is difficult because the funds are illiquid and opaque. Since brokers receive generous commissions to sell the funds, they are loath to disclose the downside of such investments — and may have little or no idea what they are actually worth.

GPB had raised some $1.5 billion in capital to purchase private companies such as waste management firms and auto dealerships through private placements. More than 60 brokerage firms sold GPB vehicles, although the value of those investments has been scrutinized by regulators. Of special concern were the GPB Holdings Fund II and the GPB Automotive Fund, which lost 25.4% and 30%, respectively, in revaluations issued last year.

Late last year, the U.S. Department of Justice charged GPB’s Chief Compliance Officer Michael S. Cohn with obstruction of justice, claiming he stole information from the U.S. Securities and Exchange Commission (SEC), where he had previously served as examiner.

“When Cohn left the SEC to join GPB, he left with more than his own career ambitions,” according to a statement from FBI agent William F. Sweeney, Jr. “The proprietary information he allegedly retrieved—from databases he wasn’t authorized to access—included compromising information about a GPB investigation and sensitive details related to the same.”

GPB and its executives have been named in multiple regulator actions over the past year. Last month, Massachusetts securities regulators alleged the firm “engaged in fraudulent acts and tried to deceive investors,” which GPB denied in a statement, according to The Wall Street Journal. The Massachusetts complaint alleged that GPB “had cooked its convoluted books as it struggled to keep paying its investors monthly sums even when it wasn’t earning the money it had promised to deliver monthly,” according to Law360.com.

Have you invested in GPB? FINRA and the SEC have strict rules on disclosing essential details on all investments sold by brokers and investment advisers. Firms are also legally compelled by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about the vehicles sold. Investors can file FINRA arbitration complaints if these rules are broken.

Stoltmann Law Offices has filed dozens of cases in FINRA arbitration against various brokerage firms seeking to recover their clients’ losses in the GPB Funds.  Those brokerage firms include Madison Avenue Securities, Kalos Capital, National Securities Corp., Concorde, and David A. Noyes, amongst others.

If you invested in the GPB Funds based on the solicitation of a broker or financial advisor, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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