Articles Posted in Private Placements

shutterstock_21147109-300x234The investment fraud lawyers at Gana Weinstein LLP are investigating reports and accusations that health start-up uBiome routinely billed patients multiple times without consent and pressured doctors to approve tests.  According to a CNBC report in May 2019, the FBI raided the company’s offices its co-CEOs and founders Jessica Richman and Zac Apte went on administrative leave.  Our firm is analyzing private placement offerings by uBiome and believe that brokerage firms that sold this investment may have done so unsuitably and otherwise failed to conduct due diligence would have revealed problems with the company.

The company’s product, the SmartGut test, promised users to provide new insights into the bacterial makeup so that they can make improvements to their health. However, according to users and CNBC report when patients one one test uBiome sends multiple kits in the mail.  uBiome then charges insurance companies for these tests which are reported to be up to $2,970 per test. According to CNBC’s investigation uBiome was routinely billing patients multiple times without their consent causing insurance plans to start rejecting claims. In addition, uBiome has been accused of pressuring doctors to approve tests with minimal oversight.

It is possible that uBiome sought to over bill in order to increase the valuation of the company to investors.  uBiome was founded in 2012.  The company raised more than $100 million in venture funding and was valued at about $300 million at its most recent round of financing last September.  The company reported used used billable samples, rather than reimbursement rates, as the key growth metric for the company and routinely shared these figures with investors.

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shutterstock_175835072-300x199Our firm represents multiple clients who have been recommended GPB Capital Holdings (GPB Capital) related investments. GPB invests in a variety of businesses but primarily in auto dealerships and waste management businesses.  However, over the past year controversy has embroiled GPB Capital in a saga including multiple regulatory investigations and even an FBI referral which has left investors clueless to the fate of their investments.

According to our investigation Kalos Capital, Inc. (Kalos Capital) and its brokers including Joshua Stivers (Stivers) have recommended GPB Capital private placements to investors.

As a background, financial advisers sold $1.5 billion of these high-risk private placements offered by GPB Capital Holdings.  However, GPB Capital told investors in 2018 that virtually none of the firm’s financial reports could be trusted and that in fact the offering had no accurate financial information.  Recently, GPB Capital released its own internal analysis and valuation of its funds without providing any evidence to support its findings.  As reported by InvestmentNews, the two largest funds offered GPB Holdings II and GPB Automotive Portfolio have declines of 25.4% and 39%.  However, some of the other funds, like Armada Waste, faired much worse declining to only 32% of their original value.  Again these valuations are provided by GPB Capital and only after a year of accounting mishaps.

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shutterstock_180412949-300x200Our firm represents multiple clients who have collectively lost millions in GPB Capital Holdings (GPB Capital) related investments.  Recently, class action lawsuits have been filed against GPB Capital with the goal of recovering investor funds.  However, it is our law firm’s belief that remedies against the sales agents who peddled GPB Capital offerings provide investors with potentially quicker and better recovery options.  Further, investors in many cases do not lose out from the ability to still collect from a class action resolution if such an event occurs.

Our firm has analyzed the GPB Capital offerings and believe that brokerage firms did not review these offerings in any significant detail.  Our firm’s investigation has found that brokerage firms failed to conduct due diligence and investigate multiple aspects of GPB Capital’s business including its senior management, fantastical business claims, and intra-fund lending practices.  For instance, with respect to GPB Capital’s senior management the company was founded by David Gentile (Gentile).  Had brokerage firms investigated GPB Capital’s senior manager it would have found that prior to founding GPB Capital, Gentile’s experience was as a CPA and company advisor with the accounting practice his family ran at Gentile Pismeny & Brengel, LLP (GP&B) in New York.  Nonetheless, GPB’s PPMs claimed expertise in these areas.   GPB Holdings II, LP, PPM, pg. 9 (Apr. 13, 2015) (“GPB’s senior management have a great deal of experience investing in the Automotive Retail, Managed IT Services and Life Sciences sectors.”).

Any investigation would have revealed that GPB Capital is merely the private equity investment arm of a plain vanilla accounting practice.  There is no evidence that GPB Capital’s senior management had the knowledge, industry experience, or investment experience to run the operations of a $1.8 billion dollar mult-asset strategy private equity fund and should not have been entrusted with investor funds.  Our investigation has also identified a number of business claims that any review would have revealed could not have possibly be substantiated.

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shutterstock_150746-300x199According to BrokerCheck records Ross Sinclaire & Associates, LLC (Ross Sinclaire) has been subject to a regulatory action over, among other things, the firm’s sales practices with respect to several private placement offerings.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Ross Sinclaire has been accused by FINRA of failing to disclose material information to investors in relation to several offerings offerings.

FINRA alleged that in March and April 2014, Ross Sinclaire was the exclusive placement agent for a private placement of notes and was involved in the preparation and circulation of a Confidential Information Memorandum (CIM) to seven accredited investors for notes.  The proceeds were to provide to a film production company for the advance funding of anticipated state tax credits.  The CIM disclosed that in addition to a 2% commission, Ross Sinclaire would also earn a “certain percentage” of profits on the sale of tax credits but failed to disclose that it would earn half of those profits.  FINRA found that this information was a material fact that would have been important to investors.  FINRA also found that the CIM also failed to disclose that one of Ross Sinclaire’s registered representatives was Vice President or the issuer.

In another offering, FINRA alleged that between December 2015 and December 2016, Ross Sinclaire omitted material facts from the Private Placement Memorandum (PPM) for municipal bonds underwritten by the Firm to finance the construction of a community recreation center. FINRA found that Ross Sinclaire failed to disclose in the PPM: (i) that the issuer had threatened to default on an earlier series of bonds and bond anticipation notes (BANs); (ii) that a loan agreement existed between the issuer and Ross Sinclaire: and (iii) information about the finances of both the issuer and Ross Sinclaire.  FINRA determined that this information should have been included in the PPM as it would have been material to investors in deciding whether to invest in the bonds.

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shutterstock_168326705-199x300Our firm represents multiple clients who have been recommended GPB Capital Holdings (GPB Capital) related investments. GPB invests in a variety of businesses but primarily in auto dealerships and waste management businesses.  However, over the past year controversy has embroiled GPB Capital in a saga including multiple regulatory investigations and even an FBI referral which has left investors clueless to the fate of their investments.

According to our investigation Royal Alliance Associates, Inc. (Royal Alliance) and its brokers including Matthew Crafa (Crafa) have recommended GPB Capital private placements to investors.

As a background, financial advisers sold $1.5 billion of these high-risk private placements offered by GPB Capital Holdings.  However, GPB Capital told investors in 2018 that virtually none of the firm’s financial reports could be trusted and that in fact the offering had no accurate financial information.  Recently, GPB Capital released its own internal analysis and valuation of its funds without providing any evidence to support its findings.  As reported by InvestmentNews, the two largest funds offered GPB Holdings II and GPB Automotive Portfolio have declines of 25.4% and 39%.  However, some of the other funds, like Armada Waste, faired much worse declining to only 32% of their original value.  Again these valuations are provided by GPB Capital and only after a year of accounting mishaps.

Our firm’s investigation has found that brokerage firms failed to conduct due diligence and investigate multiple aspects of GPB Capital’s business including its senior management, fantastical business claims, and intra-fund lending practices.  For instance, with respect to GPB Capital’s senior management the company was founded by David Gentile (Gentile).  Had brokerage firms investigated GPB Capital’s senior manager it would have found that prior to founding GPB Capital, Gentile’s experience was as a CPA and company advisor with the accounting practice his family ran at Gentile Pismeny & Brengel, LLP (GP&B) in New York.  Nonetheless, GPB’s PPMs claimed expertise in these areas.   See GPB Holdings II, LP, PPM, pg. 9 (Apr. 13, 2015) (“GPB’s senior management have a great deal of experience investing in the Automotive Retail, Managed IT Services and Life Sciences sectors.”).  Any investigation would have revealed that GPB Capital is merely the private equity investment arm of a plain vanilla accounting practice.  There is no evidence that GPB Capital’s senior management had the knowledge, industry experience, or investment experience to run the operations of a $1.8 billion dollar mult-asset strategy private equity fund and should not have been entrusted with investor funds.

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shutterstock_20354401-300x200The attorneys at Gana Weinstein LLP are currently investigating Mariemont Capital Partners, LP (Mariemont Capital Partners) and its principals William “Bill” Kielczewski (Kielczewski).  If you have suffered investment losses with Mariemont Capital Partners our firm would be interested in speaking with you.  According to a BrokerCheck report, through May 2017 Kielczewski was a broker with The Huntington Investment Company (Huntington Investment) out of the firm’s Toledo, Ohio office location.  During this time Kielczewski is alleged to have sold $10 million in investments in Mariemont Capital Partners without disclosing this fact to Huntington Investment.

In May 2019 FINRA filed a complaint alleging that Kielczewski falsely and repeatedly represented to his member firm that he was merely a passive investor in Mariemont Capital Partners when, in fact, he was actively involved with the fund, promoting it to potential investors. Instead, FINRA found that Kielczewski helped to facilitate customer investments in the fund by assisting in the completion of wire transfers in order to fund their investments, reviewed and made revisions to the fund’s pitch book and quarterly portfolio reports, and occasionally suggested to a customer certain securities to purchase for the fund.  When FINRA reviewed Kielczewski’s tax returns they showed that Kielczewski identified himself as a general partner of the investment manager of the fund and he declared ordinary business income losses and non-passive ordinary income. FINRA found that Kielczewski participated in multiple private securities transactions through which four firm customers invested over $10 million in the hedge fund without providing prior written notice to his firm.

Mariemont Capital Partners SEC private placement filing in 2014 states that the total offering amount was $250,000,000 of which $53,400,000 had been already sold.  According to the fund’s website Kevin Taylor is the founder and Chief Investment Officer of Mariemont Capital and has 17 years of fixed income trading experience to identify value within the non-agency residential mortgage backed securities market.

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shutterstock_156562427-300x200Our firm represents multiple clients who have been recommended GPB Capital Holdings (GPB Capital) related investments. GPB invests in a variety of businesses but primarily in auto dealerships and waste management businesses.  However, over the past year controversy has embroiled GPB Capital in a saga including multiple regulatory investigations and even an FBI referral which has left investors clueless to the fate of their investments.

Recently, GPB Capital released its own internal analysis and valuation of its funds without providing any evidence to support its findings.  The results were not good for investors.  As reported by InvestmentNews, the two largest funds offered GPB Holdings II and GPB Automotive Portfolio have declines of 25.4% and 39%.  However, some of the other funds, like Armada Waste, fared much worse declining to only 32% of their original value.  Again these valuations are provided by GPB Capital and only after a year of accounting mishaps.

As a background, financial advisers sold $1.5 billion of these high-risk private placements offered by GPB Capital Holdings. More than a year ago GPB Capital was supposed to file registration forms with the SEC for two of its largest funds to make certain accounting and financial disclosures required under the securities laws.  However the company did not meet its deadline back in April 2018 and now over a year later has no firm date when annual reports for the two funds will be filed and the public has no clue what those values will look like.

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shutterstock_103681238-300x300At Gana Weinstein LLP, we often hear from investors who were recommended by their advisors to purchase high risk private placement investments and suffered substantial – often crushing losses as a result.  Our firm regularly represents these investors in disputes with the advisors and brokers who sold these products without adequate disclosure.  Brokers have a responsibility to conduct due diligence on all private placement offerings.  Due diligence includes an investigation into the investment’s properties including its benefits, risks, tax consequences, issuer, history, and other relevant factors.

Private placements are bond, equity, or other debt instruments issued in reliance on a statutory or rule-based exemption from the registration requirements administered by the (SEC).  The private placement industry was created based upon the reasoning that exempting private placements from registration is appropriate where purchasers have the economic ability, sophistication, and the professional advice necessary to do without the regular protection afforded by the disclosures required through registration.  According to sources, a total of $33.5 billion was raised in 647 transactions through the third quarter of 2018.

Recently FINRA put out an announcement that called out the shortcomings it observed in the industry when it comes to due diligence. FINRA found that firms “failed to conduct reasonable diligence on private placements and failed to meet their supervisory requirements.”  FINRA stated that firms that performed “reasonable diligence conducted meaningful, independent research on material aspects of the offering; identified any red flags with the offering or the issuer; and addressed and resolved concerns that would be relevant to a potential investor.”  Firms should have a due diligence process such as “creating a due diligence committee (at larger firms) or otherwise formally designating one or more qualified persons (at smaller firms), and charging them with investigating and determining whether to approve the offering for sale to investors.”  The crucial ingredient is for “firms independently verified information that was key to the performance of the offering…”

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shutterstock_54642700-300x200According to our investigation Kalos Capital, Inc. (Kalos Capital) and its brokers possibly including Eric Weschke (Weschke) have recommended GPB Capital Holdings (GPB Capital) private placements to investors.  Weschke has been subject to at least 13 customer complaints and two regulatory action during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Weschke’s customer complaints allege that Weschke recommended unsuitable securities recommendations in a variety of products including alternative investments, real estate securities, and private debt among other allegations of misconduct in the handling of customer accounts.

In February 2019 a customer filed a complaint alleging that Weschke violated the securities laws by, among other things, that Weschke made unsuitable investment recommendations, breach of fiduciary duty, and failure to supervise during the time period October 2015 through 2017.  The claim is currently pending.

In February 2019 a customer filed a complaint alleging that Weschke violated the securities laws by, among other things, that Weschke made unsuitable investment recommendations, breach of fiduciary duty from October 2015 through 2017.  The claim is currently pending and alleged $200,000 in damages.

Investors who have invested in GPB Capital are encouraged to contact us for a free consultation.  Our firm represents multiple clients who have been recommended GPB Capital Holdings (GPB Capital) related investments. GPB invests in a variety of businesses but primarily in auto dealerships and waste management businesses.  However, over the past year controversy has embroiled GPB Capital in a saga including multiple regulatory investigations and even an FBI referral which has left investors clueless to the fate of their investments.  Investors should prepare themselves that the worst possible outcome, including significant losses on their investments, may be unavoidable.

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shutterstock_186471755-300x200The law offices of Gana Weinstein LLP have represented investors who were sold private placement investments in real estate ventures issued by Shopoff Securities.  The Shopoff Land deals are highly risky and often times unsuitable for investors. Our attorneys can analyze your accounts and determine if you have a potential claim.

Recently, The Financial Industry Regulatory Authority (FINRA) brought a case against Shopoff Securities, Inc., William Shopoff, and Stephen Shopoff. From about December 2010 through March 2017 FINRA alleged Shopoff Securities fraudulently sold approximately $12.57 million of promissory note investments to 29 investors.  FINRA claimed that Shopoff Securities failed to disclose that $165,000 investment proceeds would actually be transferred to William Shopoff and his personal trust to pay his and his wife’s personal expenses.  FINRA also claimed that Shopoff also failed to disclose that some investment proceeds would be used to repay previous note investors.

In addition, FINRA alleged that from at least August 2014 through August 2016 Shopoff Securities and William Shopoff fraudulently sold two private placement offerings by massively inflating his and his wife’s cash assets in a financial statement given to a third-party due diligence provider assessing the Shopoffs’ financial wherewithal. During this time William Shopoff made material misrepresentations and omissions about his and Shopoffs financial condition in connection with sales of Shopoff Land Fund III and Shopoff Land Fund IV.  FINRA claims that in March 2014, William Shopoff caused the transfer of a temporary $1.5 million to William Shopoff’s personal bank account from the account of an affiliate of Shopoff Realty in order to artificially and falsely inflate the appearance of his liquid net worth.  FINRA claims that William Shopoff then directed Shopoff Realty to provide an accounting firm with the artificially inflated cash amount in William Shopoff’s personal bank.

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