Articles Posted in Private Placements

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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shutterstock_184920014-300x199According to BrokerCheck records financial advisor Kevin Wilson (Wilson), currently employed by National Securities Corporation (National Securities) has been subject to at least four customer complaints.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Wilson’s customer complaints allege that Wilson committed violations of the securities laws with respect to the sale of predominately private placement securities.  These private placement sales occurred while Wilson was employed by Laidlaw & Company (UK) Ltd. (Laidlaw).

The securities lawyers of Gana Weinstein LLP recently filed a complaint on behalf of a client alleging that Laidlaw & Company (UK) Ltd. (Laidlaw) recommended the investor purchase a micro cap stock underwritten by the firm in violation of the securities laws.  According to newsources and public filings Laidlaw and its brokers have been involved in the fraudulent promotion of small and micro cap stocks to their clients in violation of their duties to their clients to disclose conflicts of interests.

Recently, one of Laidlaw’s clients, Barry Hoing (Hoing), was charged by The Securities and Exchange Commission (SEC) for generating $27 million through a “classic pump-and-dump scheme.” The SEC’s allegations focus on stocks including BioZone Pharmaceuticals (now Cocrystal Pharma) (COCP), MGT Capital (OTC: MGTI), and MabVax Therapeutics (OTC: MBVX).   However, other public filings reveal Hoing was also involved in other stocks including Riot Blockchain (RIOT), PolarityTE (PTE formerly COOL), and Marathon Patent Group (MARA).  In addition, Laidlaw was involved in other private placement securities offerings including Aethlon Medical, Actinium, Boston Therapeutics, 5G Investment, Alliaqua, Aspen Group, Brazahav Resources, Fusion Telecoms International, Protea Biosciences Group, Aeolus Pharmaceuticals, Medovex Corp, Relmada Therapeutics, Sevion Therapeutics, Spectrascience, and Spherix.

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shutterstock_155045255-289x300Advisor Samuel Monchik (Monchik), currently employed by Geneos Wealth Management, Inc. (Geneos Wealth) has been subject to at least two customer complaints.  According to a BrokerCheck report many of the customer complaints concern alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In August 2018, a customer filed a complaint alleging that Monchik made unsuitable recommendations, breach of fiduciary duty, and failure to adequately disclose the risks in REITs and direct investments – DPP & LP interests purchased between March of 2008 and November of 2015.  The complaint is currently pending.

In July 2017 a customer filed a complaint alleging that Monchik made unsuitable recommendation of an oil & gas investment in June 2008.  The complaint was denied by the firm.

In September 2008 FSC Securities Corporation terminated Monchik’s alleging that he violated the firm’s policies with respect to transactions in Non-Traded REITs.

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shutterstock_189135755-300x300The law offices of Gana Weinstein LLP have previously reported on their investigation into GPB Capital Holdings (GPB Capital) and its dispute with a former business partner Patrick Dibre (Dibre) who allegedly reneged on the sale to GPB Capital of certain auto dealerships causing the fund to lose $40 million according to GPB’s complaint.  That litigation is still playing out in court.

GPB Capital has raised an astonishing $1.8 billion in investor money since 2013.  However as reported, GPB will stop raising new money for now to focus on accounting issues and financial statements of its two large funds.  Subsequent reporting has alerted the public that investors should no longer rely on 2015 and 2016 financial statements and independent accounts’ reports for: GPB Automotive Portfolio, ($622.1 million); GPB Holdings II, ($645.8 million); and GPB Holdings Qualified.  Apparently, these accounting revisions are only being made because GPB Capital missed an April 30 deadline to file financial statements with the Securities and Exchange Commission (SEC) which crossed industry thresholds for making such information public more than a year ago.

Investors should be concerned at this point as it is highly unusual for funds’ of this size to cease raising funds unless there are serious concerns.  Moreover, delays in reporting financials and the need to release new reports concerning financial statements made three years ago are highly troubling.  This suggests potentially multiple years of false information or a size and nature that is currently unknown.

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shutterstock_143685652-300x300The law offices of Gana Weinstein LLP are investigating Premium Point Investments, LP (Premium Point) and allegations made by The Securities and Exchange Commission (SEC) announcing that it has charged the New York based investment adviser with inflating the value of private funds it advised by over $200 million dollars.  In the complaint the SEC also charged Premium Point’s CEO Anilesh Ahuja (Ahuja) and Amin Majidi (Majidi), a former partner and portfolio manager at the firm, among others charged.

According to the complaint, Premium Point described itself as focused on investment opportunities in securities, mortgages, loans, real property, and consumer receivables.  However, the fund did not perform well the SEC alleged it ran a scheme from at least September 2015 through March 2016 by inflating the value of its portfolio to hide the poor performance.  The fund purportedly engaged in a secret deal where in exchange for sending trades to a broker-dealer, Premium Point received inflated broker quotes for certain mortgage-backed securities (MBS).  Another deceptive technique was the alleged use of imputed mid-point valuations that further inflated the value of securities.

Premium Point’s fraud began to unravel after its auditor questioned the valuation practices in 2015.  At that time Premium Point told investors it had overvalued all of its funds by 13 percent to 15 percent from September 2015 to March 2016.  However, there are substantial variation between funds and Premium’s flagship fund – the Mortgage Credit Hedge Fund, is alleged to have been mismarked by as much as 24 percent dating back to at least January 2014.