Articles Posted in Private Placements

shutterstock_145123405-200x300Advisor Christopher Ortiz (Ortiz), currently employed by National Securities (National Securities) has been subject to at least two customer complaints during the course of his career.  According to a BrokerCheck report the complaints appear to concern unsuitable investments in private placements investments.  These allegations may concern investments in GPB Capital Holdings (GPB Capital) related investments.  National Securities is known to have approved their brokers to sell GPB Capital to their clients.

On February 4, 2021 the U.S. Securities and Exchange Commission (SEC), the U.S. Attorney’s Office for the Eastern District of New York (DOJ), and seven states filed separate simultaneous actions against GPB Capital and other defendants connected to the firm accusing it of being a Ponzi-like scheme.  In a press release the SEC stated that it “charged three individuals and their affiliated entities with running a Ponzi-like scheme that raised over $1.7 billion…”

As reported by Bloomberg “If proved, [GPB] would be one of the largest such schemes to target individual investors since the massive frauds of Bernard Madoff and Robert Allen Stanford came to light.”  The DOJ indicted David Gentile, the founder of GPB, Jeffry Schneider, the owner and CEO of Ascendant Capital LLC, and Jeffrey Lash, a former managing partner of GPB relating to the fraud.  If convicted, the defendants each face up to 20 years’ imprisonment.[1]

New York Attorney General Letitia James accused GPB of “defrauding investors across the country out of more than $700 million through a Ponzi-like scheme that offered to pay investors generous monthly distributions they could never deliver.”[2]  Further, “Investors put in more than $1.8 billion into GPB funds but were left without a single cent of profit,” said Attorney General James.  Investor funds are alleged to have been spent to subsidize expensive toys like private planes, Ferrari sports cars, and luxury travel for the three defendants.

What’s GPB Worth Now?  “According to court papers, GPB claimed to manage just $239 million as of December, despite raising the $1.8 billion.”[3]  If true, this would reflect approximately 13% of investors’ total investments across all GPB funds. Continue Reading

shutterstock_176283941-300x200Advisor Troy Goldberg (Goldberg), currently employed by National Securities (National Securities) has been subject to at least 13 customer complaints during the course of his career.  According to a BrokerCheck report the six most recent customer complaints filed since 2019 appear to concern unsuitable investments in private placements investments.  These allegations may concern investments in GPB Capital Holdings (GPB Capital) related investments.  National Securities is known to have approved their brokers to sell GPB Capital to their clients.

On February 4, 2021 the U.S. Securities and Exchange Commission (SEC), the U.S. Attorney’s Office for the Eastern District of New York (DOJ), and seven states filed separate simultaneous actions against GPB Capital and other defendants connected to the firm accusing it of being a Ponzi-like scheme.  In a press release the SEC stated that it “charged three individuals and their affiliated entities with running a Ponzi-like scheme that raised over $1.7 billion…”

As reported by Bloomberg “If proved, [GPB] would be one of the largest such schemes to target individual investors since the massive frauds of Bernard Madoff and Robert Allen Stanford came to light.”  The DOJ indicted David Gentile, the founder of GPB, Jeffry Schneider, the owner and CEO of Ascendant Capital LLC, and Jeffrey Lash, a former managing partner of GPB relating to the fraud.  If convicted, the defendants each face up to 20 years’ imprisonment.[1]

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shutterstock_190371500-300x200According to records kept by The Financial Industry Regulatory Authority (FINRA) financial advisor Joseph Hain (Hain), currently employed by Noble Capital Markets, Inc. has been subject to at least two customer complaints during the course of his career.  Hain’s customer complaints alleges that Hain misrepresented private placement investments among other allegations of misconduct relating to the handling of their accounts.

At 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.

In January 2020 a customer complained that Hain violated the securities laws by alleging that Hain made investments recommendations that were materially misrepresented concerning an investment in a private placement.  The claim alleges $500,000 in damages and is currently pending.

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shutterstock_173864537-300x200Advisor Darrin Cohn (Cohn), currently employed by Triad Advisors LLC (Triad Advisors) has been subject to at least two customer complaints during the course of his career.  According to a BrokerCheck report these customer complaints appears to concern unsuitable investments in alternative investments.  These allegations may also concern investments in GPB Capital Holdings (GPB Capital) related investments.  Triad Advisors are known to have approved their brokers to sell GPB Capital to their clients.

GPB Capital is facing multiple accusations of being a Ponzi scheme, an ongoing U.S. Securities and Exchange Commission (SEC) and FBI investigations, and even GPB’s chief compliance officer being indicted for illegally obtaining information on the SEC’s investigation.  Now even Volkswagen and Toyota are threatening to pull the plug on GPB Capital auto dealerships.  While advisors have been telling investors to do absolutely nothing and just hang in there – this is nothing more than just additional poor advice.  In November 2019 GPB Capital’s admitted that no financial audit would occur anytime in the near future.  The firm has admitted that it has never been profitable and has merely returned investor capital in the past in order to fake a successful business model.  In sum, investors now know there is nothing to hang onto.  By the day, advisor recommendations to do nothing appear to be completely self-serving, out of the loop, and not in the interest of the investor.

In March 2020 a customer complained that Cohn violated the securities laws by alleging that Cohn engaged in sales practice violations related to unsuitable investments in alternative investments.  The claim alleges $400,000 in damages and is currently pending.

In March 2020 a customer complained that Cohn violated the securities laws by alleging that Cohn engaged in sales practice violations related to unsuitable investments in multiple alternative investments.  The claim alleges $200,000 in damages and is currently pending.

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shutterstock_187083428-300x198The attorneys at Gana Weinstein LLP are investigating BrokerCheck reports that financial advisor Mark Cline (Cline), currently employed by National Securities Corporation (National Securities) has been subject to at least 12 customer complaints and one criminal matter during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Cline’s customer complaints involves the sale of private placements.  The complaints allege that Cline recommended unsuitable investments in these private placements.

At 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.

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shutterstock_183549914-300x200Former stockbroker James Kirchner (Kirchner), former employed by brokerage firms David A. Noyes & Company (David Noyes), IFS Securities, and Cabot Lodge Securities LLC (Cabot Lodge) has been subject to at least seven customer complaints and one employment terminations for cause during the course of his career.  According to a BrokerCheck report some of the customer complaints concern private placements.  The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk products when they are not vetted appropriately by the firm selling them.

In March 2020 a customer complained that Kirchner violated the securities laws by alleging that Kirchner engaged in sales practice violations related recommending alternative investments that were not suitable. The claim alleges $175,000 in damages and was settled for $90,000.

In January 2020 a customer complained that Kirchner violated the securities laws by alleging that Kirchner engaged in sales practice violations related to recommending private placements during 2016 and 2017 that were not suitable. The claim alleged $300,000 in damages and was settled for $145,000.

In July 2019 a customer complained that Kirchner violated the securities laws by alleging that Kirchner engaged in sales practice violations related to recommending private placements during 2016 that was not suitable. The claim alleged $100,000 in damages and was settled for $50,000.

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shutterstock_120556300-300x300The law offices of Gana Weinstein LLP continue to investigate broker sales of the Walton Land Fund companies (Walton Land).  Walton Land has been solicited many brokers across the country as investments in real estate.  Walton Land is a highly speculative private placement that invests on vacant undeveloped properties that do not generate income.  The hope is that one day in the far future Walton Land can sell the properties for a profit to someone else to develop.  The problem is that Walton Land needs to pay carrying costs on the properties while they do not generate income.  In addition, newsources have exposed that Walton Land makes a profit on these properties by selling them to the funds at a huge mark up

As a recent Bloomberg article exposed a “markup of five times Walton’s own price wasn’t unusual across hundreds of properties. In one 2008 investment vehicle, Walton bought 304 acres northeast of Atlanta at a price of $13,600 an acre in U.S. dollars, and syndicated it to investors at about $68,000 an acre.”  In other words, Walton is sure to profit on its own deals by selling properties it bought for way cheaper to ignorant retail investors for many times the properties’ actual value.  In addition, broker’s are paid huge commissions to never reveal these facts to their clients and get their “cut” of the land fraud.  “Walton also was paying sales commissions as high as 13.25% in some cases, even though 6% is more typical for speculative investments, securities experts say.”

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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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