GPB Capital Holdings LLC founder David Gentile pleaded guilty Thursday to running a Ponzi-like scheme that federal prosecutors said risked more than $1.8 billion raised by thousands of investors.
Gentile's co-defendant Jeffry Schneider, who ran Texas-based Ascendant Capital, was also convicted of securities fraud and conspiracy charges by a federal jury in Brooklyn, New York, after a trial that lasted more than seven weeks .
Prosecutors in Brooklyn District Attorney Breon Peace's office argued that Gentile and Schneider conspired to mislead investors about the source of the money used to pay their monthly distributions and about the amount of income from the two GPB private equity funds. Both were accused of using money from private equity funds to cover shortfalls and enrich themselves.
“GPB was built on lies,” prosecutor Nicholas Axelrod told jurors during opening statements in the trial. “It's about greed and deception. It's about investors who have been lied to for years and years about the basic facts of their investments.”
Gentile was found guilty of five counts, including securities fraud, wire fraud and conspiracy, while Schneider was convicted of three counts, including securities fraud and conspiracy. Both face up to 20 years in prison for securities fraud.
U.S. District Judge Rachel Kovner set a sentencing date for Oct. 24.
Attorneys for both men declined to comment after court, but they told the judge they will file motions to overturn the verdict.
GPB, founded in 2013, described itself as an alternative asset manager that acted as general partner and manager for other funds, which invested in businesses including automotive retail, waste management and healthcare.
Gentile's lawyer, Matthew Menchel, argued that investors were told they could be paid with their own funds. He and Glenn Coulton, an attorney for Schneider, both argued that their clients had done nothing wrong and said the case would have been better handled as a civil suit rather than a criminal one.
The government's case featured an inside account from Jeffrey Lash, a former managing director of GPB, who pleaded guilty to wire fraud and testified in hopes of getting a lighter sentence.
GPB used the funds to subsidize private jets and luxury travel for the three executives, according to a separate lawsuit filed in 2021 by New York Attorney General Letitia James, which is still pending. The payments went to their personal bank accounts and to family members, and Gentile even bought a Ferrari with the money, James alleged.
The US Securities and Exchange Commission claims in a related lawsuit that about 17,000 investors were affected, about 4,000 of them elderly.
The case is US v. Gentile, 21-cr-54, US District Court, Eastern District of New York (Brooklyn).