What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: February 17, 2021

Chicago-based Stoltmann Law Offices, P.C. represents GPB investors in claims against brokerage firms and financial advisors who solicited investments in the GPB Capital Funds.  GPB was named in a criminal indictment by the U.S. Department of Justice on February 4. GPB’s top executives were charged with fraud and running a Ponzi scheme. The government charged three GPB executives — David Gentile, Jeffrey Schneider and Jeffrey Lash — with securities fraud, wire fraud and conspiracy.

According to Investment News, “GPB raised $1.8 billion from investors starting in 2013 through sales of private partnerships, but it has not paid investors steady returns, called distributions, since 2018. More than 60 broker-dealers partnered with GPB to sell the private placements and charged customers charged clients commissions of up to 8%.” Stoltmann Law Offices pursues those brokerage firms for their investor-clients to recover GPB losses.

Gentile, the owner and CEO of GPB Capital, and Schneider, owner of GPB Capital’s agent Ascendant Capital, are charged with lying to investors about the source of money used to make 8% annualized investor payments, according to the SEC’s complaint. Using the marketing broker-dealer Ascendant Alternative Strategies, GPB told investors that the unusually high payments were paid exclusively with monies generated by GPB Capital’s portfolio companies, the SEC alleged. At first glance, the distributions were highly appealing to investors, since ultra-safe U.S. Treasury Notes are yielding around 1%.

According to the SEC, GPB Capital and Gentile “with assistance from Lash, also allegedly manipulated the financial statements of certain limited partnership funds managed by GPB Capital to perpetuate the deception. Those financial statements gave the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it actually was, the complaint alleges.”

GPB allegedly used investor money to pay part of the annualized 8% payments, one of the characteristics of a Ponzi scheme, where “new” money is used to pay distributions to existing investors. GPB and brokers selling its funds also tacked on millions of dollars in onerous fees and commissions. The U.S. Securities and Exchange Commission (SEC) has also filed a civil complaint, along with regulators in Alabama, New Jersey, and New York, which filed parallel civil lawsuits to the SEC’s complaint.

Unfortunately for investors, the GPB scheme “allegedly continued for more than four years in part because GPB Capital kept investors in the dark about the limited partnership funds’ true financial condition, according to the SEC, and failing to deliver audited financial statements and register two of its funds with the Commission.”

Did you lose money investing in GPB Funds? When brokerage firms don’t vet scam investments, called “due diligence,” investors can take action against them. Under federal and state rules, broker-advisors are paid to ensure that the investments they sell to investors are sound. When they aren’t – or they don’t disclose the risks to clients — they can be cited in arbitration cases, in which case their clients have a chance to get their money back.

Firms are also legally required 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.

If you invested with a broker-advisor and lost money as a result, 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!

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Chicago Investment Fraud Attorneys Offering Nationwide Representation to Investors

If you have suffered financial losses because of the negligence or fraud of your financial advisor or broker through unsuitable investment recommendations, over-concentration, churning, misrepresenting risks, conversion or selling away, you have legal rights and options to pursue recovery of those losses.

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