The Manhasset head of a $1.8 billion investment fund pleaded not guilty to a securities fraud scheme Tuesday in which clients allegedly were paid back with their own money instead of promised income from the firm’s investments, officials said.
David Gentile, 54, the founder, owner and chief executive officer of GPB Capital Holdings in Manhattan, was released on $500,000 bond after entering his plea to charges of securities fraud, wire fraud and conspiracy at a telephone hearing in federal district court in Brooklyn, officials said.
The head of the New York office of the FBI, William Sweeney, said in a statement: "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 investment capital … this was a lie. In truth, a significant portion of GPB’s distributions were paid directly from investor funds."
While federal prosecutors did not say in the indictment how much the victims lost, a separate civil filing by the office of the New York State attorney general’s office last week said there were thousands of victims around the country who lost more than $700 million.
GPD targeted in many cases elderly people with promises of a steady 8% return on their investments, officials said.
The criminal case is being prosecuted in the Eastern District of New York, which includes Long Island, Brooklyn, Queens and Staten Island, because more than 100 of the victims are from the district, the indictment says.
According to the indictment, also charged were: Jeffrey Lash, 51, of Naples, Florida, a former managing partner of GPB, and Jeffry Schneider, the owner and CEO of Ascendant Capitol based in Austin, Texas.
Gentile, a CPA, founded the firm in 2013. He stepped down as CEO last week after the indictment, according to a company spokesman.
GPB supposedly invested clients’ money in buying and operating "existing profitable businesses" including car dealerships, life sciences companies, information technology services businesses, and cold storage facilities, the indictment said.
But by August 2015, even the businesses the operation acquired "frequently underperformed expectations" and by December 2018, "the monthly distribution payments were suspended," the indictment said.
An attorney for Gentile could not be reached.
Acting Eastern District United States Attorney Seth DuCharme said in a statement, when Gentile was arrested last week: "As alleged, by paying investors from an undisclosed and improper source such as investor capital, the defendants repeatedly misled investors about the health and performance of their investments."
If convicted, the defendants could face up to 20 years in prison.