Epperson & Greenidge is investigating GPB Capital’s private placements and how they were sold.
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- As reported by Investment News on June 17, Fidelity Investments is telling broker dealers that they must move GPB private placements off its platform within 90 days or work with its custodian and assist them to obtain a clear valuation of the investments.
- GPB Capital may now be the subject of an FBI investigation, as reported by Investment News on March 4. The article about the FBI’s involvement can be found here.
Original Article by Dietrich Epperson, Esq. and Andrew Greenidge, Esq. of Epperson & Greenidge, P.A.
GPB Capital Holdings, LLC recently informed thousands of its investors of a significant change to their distribution payments. Beginning in 2019, investors in GPB Capital Holdings’ private placement companies will no longer be receiving regular monthly distribution checks. Instead, investors will receive distribution payments on a quarterly basis. Further, these quarterly distributions will be paid in arrears- so that each quarter’s distributions (if any) will not be paid until the following quarter. GPB Capital Holdings also informed its investors (called ‘limited partners’) that any distributions received to date are simply a ‘return of capital’ (essentially a partial refund of the investment, and not income and gain).
According to a recent article in Investment News, GPB Capital Holdings and its private placement companies are facing review by the SEC and FINRA regarding accounting issues, missed filing deadlines, use of investors’ capital contributions, and other potential irregularities. Further, an earlier article by Investment News reported that the Massachusetts Securities Division is also probing 63 brokerage firms that marketed and sold interests in GPB Capital Holdings’ private placement companies to investors. Our firm’s article on this earlier development can be found here.
All of these developments are causing growing concern for investors. According to SEC filings, over 14,000 investors have purchased roughly $1.4 billion worth of partnership units in five different companies created or offered by GPB Capital Holdings. As we noted in an earlier article, these investments are illiquid –meaning investors will find it nearly impossible to sell these investments.
GPB Capital Holdings’ private placement companies include: (1) GPB Automotive Portfolio, LP which has raised $622 million from over 6,300 investors; (2) GPB Holdings II, LP which has raised $645 million from over 6,000 investors; (3) GPB Cold Storage LP which has raised $35 million from 268 investors, (4) GPB Waste Management Fund, LP which has raised $135 million from over 1,400 investors, and (5) GPB NYC Development Fund, LP which has raised $41 million from 369 investors.
The sale of these investments provided a bonanza for brokerage firms around the country that sold the GPB investments. According to SEC filings, these firms have collectively earned $119 million in sales fees, averaging at least 8% in commissions.
Most of these GPB Capital Holdings companies pay their investors “distributions” that range from 5% to 8% per year. However, the true nature of these distributions is complicated. These distribution payments are often simply a small refund of the investors’ own money- known as ‘return of capital’. Unsuspecting investors may be confused as to what a distribution means – and mistakenly believe that they are receiving 5% or even 8% income and gain on their investment each year. Mistaken investors also believe that after receiving 5% or even 8% per year, their full initial investment will be returned to them at the end of life of the investment, akin to a bond or a note.
It appears that some unscrupulous brokers may have reinforced potential investors’ misunderstanding of these investments, and erroneously characterized these “distributions” as similar to interest on a bond or note, in an effort to close the deal and earn their roughly 8% commission.
If you, or a loved one, invested in GPB Automotive Portfolio LP, GPB Holdings II LP, GPB Cold Storage LP, GPB Waste Management Fund LP, or GPB NYC Development Fund, LP you may be interested in speaking to the experienced securities attorneys at Epperson & Greenidge, P.A.. For a free and confidential consultation, contact us online, or call our law offices at (877) 445-9261 today. We have specific experience in assisting individuals or entities who have lost money after purchasing subscriptions in private placement investments (also called private equity or alternative investments). Let our firm help you recover any losses from these investments.