Two CEOs have been convicted of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud. A Brooklyn federal jury found against Jeffry Schneider, CEO of marketing company Ascendant Capital LLC, and David Gentile, CEO of advisory firm GBP Capital Holdings LLC.
Gentile was also convicted on two counts of wire fraud. The trial lasted eight weeks, and both face a sentence of up to 20 years in prison. Sentencing is set for October 24.
Jeffrey Lash, another participant in the scheme, pleaded guilty to wire fraud last year in exchange for testimony against Schneider and Gentile.
The charges arose over a scheme to misrepresent the performance of funds and monthly distribution payments to investors. GPB was an SEC-registered investment adviser that acted as fund manager for limited partnership funds, with a portfolio focused primarily on the automotive retail, waste management, and healthcare industries.
Ascendant, a marketing firm founded by Schneider, worked in tandem with GBP to communicate to investors, and played a critical role in misleading them.
A Ponzi-like scheme
Between 2015 and 2018, Gentile and Schneider lied to investors by telling them the monthly distribution payments were generated by GPB’s portfolio companies, but the money actually came from other investors.
To conceal the deception, GPB capital manipulated the funds’ financial statements to make it appear that they were generating sufficient income. They also concealed declines in fund performance by using back-dated checks.
The fraudulent activity was reminiscent of a classic Ponzi scheme, where an illusion of profits is created by paying earlier investors with contributions from later investors.
In total, the scheme affected over 10,000 investors and involved over $1 billion of raised capital.
The criminal indictment came alongside parallel civil charges filed by the SEC against Gentile, Schneider and their companies in 2021, accusing the pair of violating Security Act and Advisers Act rules.
As part of that civil complaint, GPB was also accused of putting anti-whistleblower clauses in its termination agreements.
GPB was placed into receivership in December 2023.