The arbitration claim also alleges that David Lerner Associates and its broker, Robert Rasbach, misrepresented and omitted material information about the investment strategy and the energy investments, including:

• That investing in Energy 11 and Energy 12 involved a “high degree of risk” and was only appropriate for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment.”
• Energy 11 and Energy 12 were risky energy start-ups that were run by individuals with no experience in the oil and gas industry who were “wildcatting,” or drilling for oil and natural gas in unproven areas that have no concrete historical production, with its success tied to the energy industry and the ability of the partnerships to engage in a “liquidity event.”
• Energy 11 and Energy 12 were “blind pool” investment vehicles that put very few restrictions on what and how they could invest.
• The risks related to concentrating a significant portion of their portfolios into the volatile and risky energy sector.

Customers of David Lerner Associates, Inc. that have purchased proprietary energy-related securities from David Lerner, including Energy 11 and SOAEX, should contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as David Lerner Associates, Inc.

Energy 11, Energy 12, and SOAEX

Energy 11 and Energy 12 are illiquid and high-risk limited partnerships that were sold exclusively by David Lerner Associates. Each limited partnership was formed to acquire and develop oil and gas properties. The partnerships were “blind pools,” meaning at the time of the initial offering, the partnership had not identified any properties for acquisition.

Additionally, the partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, engaging in a liquidity event. Each limited partnership’s ability to make a return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the oil and gas properties in which the partnerships invested.

According to the Energy 11 and Energy 12 prospectuses, investments in the partnerships involve a “high degree of risk,” and these limited partnership interests were appropriate only for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment.”

Energy 11 suspended distributions to its limited partners in March 2020 before resuming them at a reduced rate in late 2021. Energy 11 accumulates unpaid distributions based on an annualized return of seven percent (7%), and all accumulated unpaid distributions are required to be paid before a final payout can occur. As of December 31, 2022, the unpaid payout accrual for the period from March 2020 through November 2021 totaled $2.387671 per common unit, or approximately $45 million.

In addition, as of Energy 11’s most recent 10-Q filing with the SEC, the limited partnership had $20.38 million in total liabilities for the quarter ended June 30, 2023.

The following is a summary of Energy 11’s current liabilities, including accrued unpaid distributions:

• Total Liabilities: $20.38 million
• Unpaid Accrued Distributions: $45 million
• Total Liabilities 45+ Unpaid Accrued Distributions: $65.38 million.

The Spirit of America Energy Fund (SOAEX) is a mutual fund created for customers of David Lerner Associates that invests 80% of its net assets in energy and energy-related companies. The Spirit of America Energy Fund primarily invests in energy-related entities such as exploration, production, and transmission companies, as well as Master Limited Partnerships (“MLPs”). The fund’s investment objective is to provide investors with long-term capital appreciation and current income. SOAEX’s stock price has plummeted since 2015.

David Lerner Associates, Inc.

David Lerner Associates, Inc. is an SEC-registered broker-dealer and FINRA member with six branch offices in New York, Connecticut, New Jersey, and Florida. David Lerner is notorious in the securities industry and has been sanctioned numerous times by securities regulators, including censures, injunctions, monetary fines, and restitution orders.

David Lerner Associates was the exclusive dealer-manager for Energy 11 and received 6% in selling commissions. David Lerner Associates is also entitled to a contingent incentive fee of up to an amount equal to 4% of gross proceeds of units sold. Based on public disclosures, it appears that David Lerner Associates has received over $22 million in seller commissions for selling Energy 11 to its customers and is potentially entitled to an additional $15 million in contingent incentive fees.

FINRA has brought numerous actions against brokers and supervisors who sold or supervised the sale of David Lerner Associates’ proprietary energy-sector securities. Those include:

• FINRA v. Abbe Jan Wollins, AWC No. 2019063686205 (June 20, 2023)
  • “Between August 2015 and April 2018, while associated with [David Lerner Associates], Willins recommended that two customer accounts invest in limited partnerships formed to acquire and develop oil and gas properties without having a reasonable basis to believe those illiquid investments were suitable for the customers. Therefore, Wollins violated FINRA Rules 2111 and 2010.”
  • “Customers A and B were a retired married couple who held an investment account with DLA. In August 2015, when Wollins recommended that they invest in an illiquid limited partnership, Customers A and B were approximately 82, retired, and receiving pension and social security benefits and savings. Between August 2015 and December 2016, at Wollins’ recommendation, Customers A and B invested a total of $128,907 in one of the limited partnerships. Wollins also recommended that senior Customer C invest $25,000 in one of the limited partnerships. At the time of his investment, Customer C was 93 and, received social security benefits, and took required withdrawals from an IRA. Customer C understood that his investment in the limited partnership would supplement his monthly income with these returns. Wollins’ recommendations that Customers A, B, and C invest in the energy partnerships were not suitable given their investment profiles. Wollins received $2,448.30 in commissions from these investments.”
• FINRA v. Rande Aaronson, AWC No. 2019063686204 (May 30, 2023)
  • “From January 2015 through October 2019, branch manager Aaronson failed to reasonably supervise sales of two illiquid oil and gas limited partnerships, Energy 11, L.P. (E11) and Energy Resources 12, L.P. (E12), to ensure that the sales were suitable for customers given their investment profiles, as required by FINRA Rule 2111 and the firm’s policies and written supervisory procedures (WSPs). Therefore, Aaronson violated FINRA Rules 3110 and 2010.”
  • “E11 and E12 are illiquid limited partnerships that registered representatives at DLA sold to their customers. Each limited partnership was formed to acquire and develop oil and gas properties. Additionally, the partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, engaging in a liquidity event. Each limited partnership’s ability to make a return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the oil and gas properties in which the partnerships invested. According to the E11 and E12 prospectuses, investments in the partnerships involve a “high degree of risk,” and these limited partnership interests were appropriate only for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment” (emphasis added).
  • “The firm’s WSPs also included a policy specific to a customer’s change of their risk tolerance, as reflected on each customer’s Suitability Profile. The policy prohibited changes to a customer’s risk tolerance solely for the purpose of qualifying the account to engage in a certain transaction. Branch managers had the supervisory responsibility to review Suitability Profiles, to assess the appropriateness of any risk tolerance changes on Suitability Profiles, and to accept and sign Suitability Profiles.”
• FINRA v. Russ Kory, AWC No. 2019063686203 (September 2, 2022)
  • “Between August 2015 and September 20 19, while associated with David Lerner Associates, Kory recommended that three firm customers invest in the firm’s proprietary limited partnerships formed to acquire and develop oil and gas properties without having a reasonable basis to believe those illiquid investments were suitable for the customers. Therefore, Kory violated FINRA Rules 2111 and 2010.”
  • “Each limited partnership was formed to acquire and develop oil and gas properties located onshore in the United States. The partnerships were “blind pools,” meaning at the time of the initial offering, the partnership had not identified any properties for acquisition. The partnerships’ objectives included making distributions to investors and, five to seven years after the termination of the offering, to engage in a liquidity event. Each limited partnership’s ability to make return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the properties in which the partnerships invested. Additionally, according to the prospectuses, investments in the partnerships involve a “high degree of risk” (emphasis added).
• FINRA v. Jeffrey D. Basford, AWC No. 2019063686202 (August 15, 2022)
  • “During the course of a FINRA investigation into potential unsuitable sales of proprietary energy products at the firm, Basford declined to appear for on-the-record testimony requested pursuant to FINRA Rule 8210.”
• FINRA v. Charles Bonilla, AWC No. 2020067626001 (February 8, 2021)
  • “Between December 2015 and December 2017, while associated with David Lerner Associates, Bonilla recommended that his customers invest in energy sector securities without having a reasonable basis to believe those investments were suitable. Due to Bonilla’s failure to conduct reasonable diligence, there were potential risks and costs of the investments, among other things, that Bonilla did not adequately understand. Accordingly, Bonilla violated FINRA Rules 2111 and 2010.”
  • “The fund’s holdings are concentrated in energy-related securities, and the fund’s performance is largely dependent on the condition of the energy industry.”

About Iorio Altamirano LLP

Iorio Altamirano LLP is investigating claims on behalf of David Lerner Associates’ customers who purchased Energy 11 and SOAEX.

To read more about the investigation, please click on the following links:

Energy 11, L.P. and Energy Resources 12 L.P.: How to Recover Investment Losses from David Lerner Associates, Inc.

Investor Update: Energy 11, L.P.’s Substantial Debt and Missed Accrued Distributions Could Take Years to Pay Off

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have suffered investment losses, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

In 2021, a federal grand jury brought criminal charges against Lash, David Gentile (founder and owner of GPB Capital), and a third individual, Jeffry Schneider. The charges are related to their management of the company, which has been described as a “Ponzi-like scheme.” In February 2021, the SEC also charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.7 billion from over 17,000 investors, many of whom were retirees.

The criminal complaint alleged that Mr. Gentile, Mr. Lash, and Mr. Schneider used new money invested by retail investors to cover the promised 8% returns to prior investors, yet failed to disclose the source of the distributions to investors.

Mr. Lash could face more than 15 years in prison as a result of the guilty plea for his alleged role in the Ponzi-like scheme. Sentencing is scheduled for October 4, 2023.

A trial for Mr. Gentile and Mr. Schneider is scheduled to begin in June 2024.

Since February 2021, GPB Capital has been operating under the supervision of a court-appointed monitor. Despite liquidating a significant portion of the firm’s assets, the company’s managers have struggled to devise a plan for distributing the cash at their disposal to investors and other claimants.

The court-appointed monitor and the United States Securities and Exchange Commission have recommended putting GPB Capital into receivership, a court-appointed tool that would put the entire company, its assets, and all financial and operating decisions under the control of a single court-appointed receiver. The proposal has been contested by the company’s owner, David Gentile. The Court has yet to act on the receivership proposal.

GPB Capital had stated on its website in April 2023 that it could not come up with a distribution plan or make any distributions to investors until the court rules on a receivership. Limited partners have not received distributions since 2018, while their invested capital remains in limbo.

According to the recent regulatory filings, it appears that GPB Capital is holding back a significant reserve to cover potential liabilities arising out of numerous regulatory, ligation, arbitration, and other proceedings. The company disclosed that any liability originating from such actions could result in an outflow of cash, which would most likely not occur until 2024 at the earliest.

Further, GPB Capital’s partnerships, such as GPB Automotive, GPB Holdings, GPB Holdings II, GPB Waste Management, or GPB Cold Storage, are setting aside a large amount of money to cover the legal expenses of its current and former officers, directors, principals, representatives, and affiliates, for any legal expenses and costs they are incurring connected within the numerous litigations and disputes that are currently pending. GPB Capital has disclosed in regulatory filings that distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires.

GPB Fraud and Brokerage Firms’ Liability

GPB Capital Holdings LLC, a private-equity firm based in New York, was established in 2013. It acted as the primary partner of several investment funds, including GPB Holdings, LP, GPB Holdings II, LP, GPB Automotive Portfolio, LP, GPB Waste Management, LP, and GPB Cold Storage, LP.

In February 2021, the SEC accused GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies of orchestrating a Ponzi-like scheme, defrauding nearly 17,000 retail investors across the nation and gathering approximately $1.7 billion via securities issued by GPB Capital.

GPB Capital solicited capital from private retail investors via private placement offerings, which were sold by nearly sixty broker-dealers and investment advisory firms across the country. However, significant concerns have been raised regarding the broker-dealers’ failure to conduct proper due diligence regarding GPB Capital and the GPB funds.

The Financial Industry Regulatory Authority (FINRA) mandates that “reasonable diligence” provides the firm or associated person with a clear understanding of the potential risks and rewards of the recommended security or strategy. Brokerage firms may have neglected to conduct sufficient due diligence into GPB Capital and its funds before selling the private placement offerings to their clients, possibly overlooking numerous red flags, including detecting whether distributions were being paid out from operating revenue or from invested capital. In the case of GPB Capital, the operating revenues of its partnerships were not sufficient to cover the company’s promised 8% distributions, yet the payouts continued. Brokerage firms either failed to detect these discrepancies or ignored them.

Investors may have legal recourse against brokerage firms or investment advisory firms due to such due diligence failures or other sales practice violations. It’s important to note that filing an arbitration claim does not prevent an investor from receiving potential future distributions from the GPB funds.

Investors can potentially recover investment losses by filing claims against broker-dealers or investment-advisory firms that sold GPB private placement offerings for large commissions.

Through 2021, GPB Capital investors have won over $2.4 million in monetary awards in 10 out of 12 (over 83%) arbitration claims that have proceeded to a final hearing.

What Can GPB Investors Do?

Iorio Altamirano LLP, a leading securities arbitration law firm based in New York, NY, is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

Our law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

Iorio Altamirano LLP is actively investigating claims on behalf of GPB investors who purchased the security through a broker-dealer or registered investment advisor, including:

• Aegis Capital Corp.
• Aeon Capital Inc.
• American Capital Partners
• Arkadios Capital
• Ausdal Financial Partners, Inc.
• Avere Financial Group, LLC
• Axiom Capital Management, Inc
• BCG Securities, Inc.
• Cabot Lodge Securities LLC
• Calton & Associates, Inc.
• Capital Financial Services, Inc
• Capital Investment Group, Inc.
• Cascade Financial Management, Inc.
• Crystal Bay Securities, Inc.
• David A. Noyes & Company
• Dempsey Lord Smith, LLC
• Detalus Securities, LLC
• DFPG Investments, Inc.
• DH Hill Securities, LLLP
• Dinosaur Financial Group, L.L.C.
• Geneos Wealth Management, Inc.
• Emerson Equity LLC
• Financial West Group
• Great Point Capital LLC
• HighTower Securities, LLC
• IBN Financial Services, Inc.
• Innovation Partners, LLC
• International Assets Advisory, LLC
• Investment Architects, Inc.
• Kingsbury Capital, Inc.
• Landolt Securities, Inc.
• Lion Street Financial, LLC
• Lowell & Company, Inc.
• McDonald Partners LLC
• MML Investor Services
• Moloney Securities Co., Inc.
• Money Concepts Capital Corp
• MSC – BD, LLC
• National Securities Corporation
• Newbridge Securities Corporation
• Orchard Securities, LLC
• Pariter Securities, LLC
• Purshe Kaplan Sterling Investments
• Private Client Services, LLC
• Royal Alliance Associates, Inc.
• SagePoint Financial, Inc.
• Sandlapper Securities, LLC
• Silber Bennett Financial, Inc.
• Stephen A. Kohn & Associates, Ltd.
• Uhlmann Price Securities, LLC
• United Planners Financial Services
• Vanderbilt Securities, LLC
• Vestech Securities, Inc.
• Western International Securities, Inc.
• WestPark Capital, Inc.
• Whitehall-Parker Securities, Inc.
• Wilmington Capital Securities, LLC
• Woodbury Financial Services, Inc.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses. Our law firm has helped GPB investors recover hundreds of thousands of dollars in losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.

In a separate action, the U.S. Attorney’s Office for the Eastern District of New York filed criminal charges against Mr. Perera. He was arrested on Monday, March 27, 2023, and arraigned on a 16-count indictment charging him with securities fraud, investment advisor fraud, wire fraud, and money laundering, in connection with a scheme to induce an investor to purchase stock in companies that traded on the NASDAQ and New York Stock Exchange (NYSE).

Customers of Mr. Perera or Aegis Capital Corp. who have suffered financial losses as a result of Mr. Perera’s negligence or misconduct can contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Aegis Capital Corp.

Securities and Exchange Commission v. Surage Kamal Roshan Perera and Janues Capital Incorporated, 2:23-cv-02316

On March 27, 2023, the United States Securities and Exchange Commission (“SEC”) filed a lawsuit in federal court against Mr. Perera and his firm, Janues Capital Incorporated (“Janues”), alleging that from February 2022 until March 2023, Mr. Perera defrauded at least one investor (“Investor A”) out of millions of dollars by lying about investment opportunities and strategies; misappropriating the investor’s money by, in part, not purchasing the securities she subscribed to through Janues and using a substantial portion of her money to engage in high volume, highly leveraged trading in other securities; lying to her about non-existent investment profits; and concealing large trading losses.

According to the complaint, Mr. Perera falsely told Investor A that his firm had access to specific restricted securities at discounted prices through connections with large institutional investors. Investor A first met Mr. Perera through a mutual friend when Mr. Perera was a registered broker of Aegis Capital Corp.

Mr. Perera also allegedly claimed to exercise a trading strategy—which he called “options straddles”—that would not only prevent any trading losses but also, for some of the supposed investments, guarantee returns on the investment of at least 9% and up to as much as 50%. Perera’s false promises convinced the investor to give him approximately $4.3 million.

According to the lawsuit, Mr. Perera did not use Investor A’s funds to purchase the securities she had subscribed to and did not engage in the promised “options straddles” to prevent trading losses and generate the profits he had guaranteed. Instead, he transferred at least $3.5 million of Investor A’s funds to a brokerage account in the name of his wife, Nishani Alahakoon, and used those funds to engage in highly speculative, leveraged trading, which resulted in over $3 million in trading losses.

Mr. Perera allegedly concealed his misappropriation of Investor A’s funds and his trading losses by providing Investor A with phony trade confirmations and account statements that falsely showed the expected returns and by using funds received from other sources to partially repay the investor victim.

The SEC’s complaint alleges that Mr. Perera and Janues violated antifraud provisions of the federal securities laws. Mr. Perera also was charged with aiding and abetting Janues’ alleged violations. The SEC’s complaint names Nishani Alahakoon, whose brokerage account Perera and Janues traded, as a relief defendant.

Financial Advisor Surage Kamal Roshan Perera (CRD No. 4716321)

Roshan Perera had 18 years of experience in the securities industry and was associated with 11 different brokerage firms, including five different firms that have been expelled from the securities industry by the Financial Industry Regulatory Authority (“FINRA”). Mr. Perera was registered with Aegis Capital Corp from April 18, 2018, through September 12, 2018.

According to his public disclosure report with FINRA, Mr. Perera has been the subject of at least one customer dispute, which included allegations of unauthorized trading. The 2009 dispute was settled.

Investors who have disputes with their financial advisors and brokerage firms can file securities arbitration claims to resolve the disputes and seek recovery of investment losses.

FINRA’s BrokerCheck tool can be used to obtain Mr. Perera’s complete and updated disclosure report.

Aegis Capital Corp. – A Duty to Supervise

Selling away is when a financial advisor solicits a customer to participate in a private securities transaction that is “away” from the firm. In other words, when a broker recommends a transaction to buy or sell a security that is not offered or approved by the brokerage firm where the financial advisor is employed or registered.

A brokerage firm can be held responsible for its financial advisors’ conduct in “selling away” cases under certain circumstances.

Pursuant to FINRA Rule 3280, when a broker-dealer approves a private transaction away from the firm, the firm assumes legal responsibility for the trade. There are no exceptions to this rule. Broker-dealers can be held responsible for the conduct of their financial advisors in connection with these approved transactions.

Even if a transaction is not approved by a firm, a brokerage firm can also be held liable if the financial advisor acted with apparent authority or the investor reasonably believed that the advisor’s activities were approved or part of the broker’s services.

Brokerage firms like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as private securities transactions, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

See Also:

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Aegis Capital Corp

Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

Aegis Capital Corp. Ordered to Pay Nearly $2.7 Million for Supervisory Failures Related to Rampant Excessive and Unsuitable Trading

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Mr. Perera or Aegis Capital Corp or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

On March 21, 2022, the Financial Industry Regulatory Authority (FINRA) ordered Dempsey Lord Smith, LLC (“Dempsey Lord Smith”) to pay nearly $100,000 in monetary fines and restitution for negligently omitting to tell four investors in an offering related to GPB Capital Holdings, LLC (“GPB Capital”) that the issuer failed to timely make required filings with the Securities and Exchange Commission (“SEC”), including filing audited financial statements. In addition, FINRA accused Dempsey Lord Smith of making unsuitable recommendations of GPB Capital securities to four investors. Dempsey Lord Smith consented to the sanctions.

Additionally, upon information and belief, Dempsey Lord Smith was a part of a network of broker-dealers who sold the speculative, high-risk, and illiquid GWG L Bonds. GWG Holdings, Inc., which stopped making interest and maturity payments to GWG L Bond investors in January 2022, filed for Chapter 11 bankruptcy in April 2022. Many GWG L Bond investors are skeptical that they will receive any significant portion of their principal back. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

Investors who purchased GWG L Bonds or any GPB Capital Funds through Dempsey Lord Smith, LLC or any other broker-dealer are encouraged to contact Iorio Altamirano LLP (www.gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

See Also:

GWG L Bond Investor Recovers Losses After Filing a FINRA Arbitration Claim

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy

GPB Investors Have Won Monetary Awards in 10 of 11 Arbitration Cases This Past Year

About GWG L Bonds

An L bond is a financial product created by GWG Holdings, Inc. The L Bonds are speculative, high-risk, and illiquid alternative investment offerings.

Initially, GWG Holdings pooled money from bond investors to purchase life insurance policies on the secondary market, paid the policy premiums, and then collected the death benefit when the insured individual passed away. However, beginning in 2018, GWG Holdings used the investor capital to invest in a new business model, exposing the company to riskier alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG Holdings offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%.

GWG L Bonds were likely not suitable for investors with a low-to-moderate risk tolerance or investors who had liquidity needs.

On April 20, 2022, GWG filed for Chapter 11 bankruptcy. According to the bankruptcy filings, the SEC has been investigating the sales practices of brokerage firms related to GWG L Bonds. It has been recently reported that the SEC’s investigation began in May 2021. We believe that this regulatory investigation includes the sales practices of Emerson Equity and its regional broker-dealers, such as Dempsey Lord Smith.

Last month, the SEC’s investigation led to its first lawsuit as the regulator filed a lawsuit against Western International Securities, Inc., and several of its brokers in a federal court in California. The firm is accused of failing to perform due diligence regarding the inherent risks associated with GWG L Bonds and recommending these risky products to customers in situations where they were not in the best interest of the firm’s customers.

Brokerage firms like Western International Securities, Inc. and Dempsey Lord Smith are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Investors who purchased GWG L Bonds should contact New York Securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation to review their legal rights.

About GPB Capital Funds

GPB Capital is a New York-based alternative asset management firm founded in 2013. GPB Capital serves as the general partner for limited partnerships formed to acquire income-producing companies. GPB Capital had four flagship funds, which were sold as private placement offerings:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

In February 2021, the SEC charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. In addition, David Gentile, the owner and chief executive of GPB; Jeffry Schneider, the owner and CEO of Ascendant Capital LLC; and Jeffrey Lash, a former GPB managing partner, are all facing criminal and civil fraud charges. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

GPB Capital raised capital from private retail investors through private placement offerings that were sold by approximately sixty broker-dealers and investment advisory firms across the country, including Dempsey Lord Smith. In total, the GPB funds have collectively raised over $1.8 million in capital from investors. While GPB Capital and financial advisors used promises of steady, 8% dividends from investment gains to lure investors, “a significant portion of GPB’s distributions were paid directly from investor funds,” according to numerous civil and criminal complaints. There are serious concerns that broker-dealers may have failed to conduct reasonable due diligence about GPB Capital and the GPB funds.

FINRA has stated that “reasonable diligence” means that the firm’s and/or broker’s due diligence “must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.”

Brokerage firms may have failed to conduct reasonable diligence into GPB Capital and the GPB funds before selling the private placement offerings to their customers. The firms’ compliance departments likely ignored or missed many red flags.

For example, according to the SEC’s complaint, beginning in August 2015, GPB Automotive Portfolio LP began to use investor funds to make distributions to other investors. However, GPB Automotive Portfolio’s private placement memorandum stated that distributions would be made from the limited partnership’s operations. The private placement memorandum was updated in June 2016 to disclose that the limited partnership may use investor capital to make distributions, but it had “no present plans to do so,” despite already doing so. These statements were false and misleading. At the time the PPM was issued, GPB Automotive Portfolio had used over $2.5 million of investor capital to pay distributions.

The false statements by GPB Capital were also discoverable by brokerage firms who sold the private placement offering to retail investors for large up-front commissions, including Dempsey Lord Smith. For example, in 2016, GPB Automotive Portfolio’s financial reports revealed that the fund made $14.3 million in distributions to investors; however, it recorded only $5.4 million of income from operations. The significant gap between the amount in distributions paid out to investors and the entity’s operating income should have been a huge red flag to brokerage firms. Instead, the red flag was ignored, and GPB Automotive Portfolio was sold to retail investors by brokerage firms and investment advisory firms. This is just one example of how brokerage firms may have failed their due diligence obligations.

As a result of due diligence failures, or other sales practice violations, GPB investors may have legal claims against brokerage firms or investment advisory firms.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019061213901

FINRA and Dempsey Lord Smith entered into FINRA Letter of Acceptance, Waiver, and Consent No. 2019061213901 (the “AWC”) on June 23, 2022, after FINRA alleged that between May 4, 2018, and June 29, 2018, Dempsey Lord negligently omitted to tell four investors in an offering related to GPB Capital that the issuer failed to timely make required filings with the SEC, including filing audited financial statements. FINRA also alleged that between September 1, 2015, and June 8, 2018, certain Dempsey Lord registered representatives made unsuitable recommendations of GPB Capital securities to four investors. By virtue of the foregoing, Dempsey Lord violated FINRA Rules 2111 and 2010.

Specifically, related to the allegations that Dempsey Lord Smith negligently failed to tell four investors material information concerning a GPB Capital Offering in 2018, FINRA alleged:

• From 2013 through 2018, GPB Capital launched several limited partnerships, each focused on acquiring controlling interests in certain private-sector companies.
• As relevant here, the GPB Capital limited partnerships included GPB Automotive Portfolio, LP (Automotive Portfolio), GPB Cold Storage, LP (Cold Storage), GPB NYC Development, LP (NYC Development), and GPB Waste Management (Waste Management).
• These GPB Capital limited partnerships raised capital by selling limited partnership interests to retail investors. GPB Capital sold the limited partnership interests through, among other channels, broker-dealers.
• The securities GPB Capital sold, including those issued by Automotive Portfolio and Holdings II, were not registered. Instead, the limited partnership interests were sold pursuant to Regulation D of the Securities Act of 1933.
• These four GPB Capital limited partnerships raised a combined amount of more than $1 billion from investors between July 2013 and August 2018.
• The GPB Capital offering documents stated that the limited partnership interests were all illiquid securities that were intended to be held by only “sophisticated investor[s]” who were “able to bear the economic and other risks of [an] investment in the [limited partnership interests] for an indefinite period of time.” The offering documents further stated that the GPB Capital limited partnership interests were “highly speculative investments which involve a high degree of risk of loss of the entire investment.” Such risks involved, among other things, GPB Capital’s lack of an operating history and significant expenses, including commissions GPB Capital typically paid to brokerage firms equal to 8% of the gross proceeds of each sale.
• Dempsey Lord first learned of GPB Capital in or around late 2013. After conducting due diligence on each offering, Dempsey Lord approved Automotive Portfolio for sale by the firm’s registered representatives in April 2015 and then approved Cold Storage in July 2015, NYC Development in April 2016, and Waste Management in August 2016.
• On July 10, 2017, GPB Capital filed a lawsuit in New York against one of its former operating partners who had allegedly failed to acquire certain automotive dealership interests (the New York Litigation). In connection with the New York Litigation, the former partner asserted various counterclaims against GPB Capital and alleged that GPB Capital had falsified financial statements to conceal that GPB Capital was defrauding its investors. GPB Capital denied the former partner’s allegations, and the litigation remains pending.
• On April 27, 2018, GPB Capital released what it characterized as important updates regarding the audited financial statements for certain of its limited partnerships, including Automotive Portfolio. The letters, which were sent to broker-dealers that sold GPB Capital-related investments, including Dempsey Lord Smith, stated that GPB Capital was in the process of registering certain classes of securities issued by certain of the limited partnerships, including Automotive Portfolio, with the SEC. As part of that process, Automotive Portfolio was required to file audited financial statements. The letters further stated that the delivery of Automotive Portfolio’s audited financial statements (which were due to be filed by April 30, 2018) would be delayed pending the completion of a forensic audit. Specifically, GPB Capital disclosed that it and its auditors “determined that it would be prudent to hire a third-party firm to complete a forensic audit in order to endeavor to put [the former partner’s] counterclaims and other allegations to rest.” The offering documents for Automotive Portfolio were not timely amended to disclose that the partnerships would be delayed in filing their audited financial statements with the SEC.
• Dempsey Lord learned of the delays and GPB Capital’s stated intention to complete a forensic audit. Between May 4, 2018, and June 29, 2018, Dempsey Lord sold four limited partnership interests in Automotive Portfolio without informing the customers that the issuer had not timely filed its audited financial statements with the SEC or the reasons for the delay. The delays in filing audited financial statements were material information that should have been disclosed. Dempsey Lord’s four sales of interests in Automotive Portfolio totaled $323,000, and the firm received a total of $25,840 in commissions from these sales.
• By negligently omitting material facts, Dempsey Lord violated FINRA Rule 2010.

Specifically, related to the allegations that Dempsey Lord Smith made four unsuitable sales of GPB Capital Securities:

• FINRA Rule 2111(a) requires that a member or an associated person must have a reasonable basis to believe that a recommended transaction is suitable for the customer.
• One of the three main obligations associated with this Rule is “customer-specific” suitability. The Supplementary Material in Rule 2111.05(b) states that “[t]he customer-specific obligation requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile, as delineated in Rule 2111(a).” A customer’s investment profile includes, among other things, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, and risk tolerance.
• Between September 1, 2015, and June 8, 2018, Dempsey Lord registered representatives recommended and sold GPB Capital securities to four customers that were unsuitable in light of the customers’ investment profiles. All of these sales were reviewed and approved by firm principals. The customers include:
• Customer A who made a $100,000 Cold Storage investment in September 2015. At the time of the investment, Customer A was 56 years old with an annual income and net worth that did not qualify her as an accredited investor as required to invest in Cold Storage. Customer A’s GPB investment also violated the firm’s internal concentration guidelines because the sale caused Customer A to exceed the 20% concentration threshold for combined holdings of alternative investments, including private placements. In addition, Customer A’s investment purpose was to save for retirement, and the customer ranked “speculation” as her least important investment objective (out of five options).
• Customer B who made a $50,000 NYC Development investment in June 2016. At the time of the investment, Customer B was 52 years old with an annual income and net worth that did not qualify her as an accredited investor, which was required to invest in NYC Development. Moreover, Customer B had limited investment knowledge with no prior limited partnership experience and an investment purpose to save for retirement.
• Customers Cl and C2 were a married couple who made a $50,000 Waste Management investment in April 2017. At the time of the investment, Customer Cl was over 76 years old and retired, and Customer C2 was over 66 years old and retired. While the customers’ net worth was just over the minimum amount to qualify as an accredited investor, because they already held two other GPB limited partnership interests, the sale of the $50,000 Waste Management investment caused them to exceed the firm’s 20% concentration threshold for combined holdings of alternative investments.
• Customer D who made a $100,000 Automotive Portfolio investment in June 2018. At the time of the investment, Customer D was over 60 years old and retired with a moderate risk tolerance and an annual income and net worth that did not qualify him as an accredited investor as required to invest in Automotive Portfolio.
• Dempsey Lord received a total of $24,000 in commissions from these four sales.
• By making unsuitable recommendations of GPB Capital securities to these four customers, Dempsey Lord violated FINRA Rules 2111 and 2010.

Dempsey Lord Smith, LLC (CRD No. 141238)

Dempsey Lord Smith, LLC has been an SEC-registered broker-dealer and FINRA member since 2007. The firm, which is based in Rome, Georgia, is a full-service introducing broker-dealer licensed to sell securities in 52 U.S. states and territories. Dempsey Lord Smith, LLC currently has a roster of approximately 100 registered brokers across the country and 28 branch offices.

Dempsey Lord Smith has six different regulatory disclosures, according to the firm’s public disclosure report with FINRA.

Financial institutions like Dempsey Lord Smith must supervise financial advisors and customer accounts properly. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Dempsey Lord Smith, LLC, has used the following names to conduct business: 1SOURCE, WRS, WEST COBB INVESTMENT GROUP, TIM COUCH PC CPA, THE DIAMOND GROUP INC., SOUTHEAST ASSET MANAGEMENT, SHALIN FINANCIAL SERVICES, INC., SC RETIREMENT PLANNING, S M SHAW, ROGER’S RETIREMENT READINESS ALLIANCE, LLC, RETIREMENT STRATEGY CONNECTION, RETIREMENT SOLUTIONS INC., PREMIER TAX ADVISORS, PREFERRED FINANCIAL SOLUTIONS, LLC, PORTER INSURANCE AND FINANCIAL, PLUS POINT ADVISORS, PINPOINT FINANCIAL SERVICES, INC, PERRY GOSSETT INSURANCE, PARPARI ASSET MANAGEMENT INC., NEXSTONE FINANCIAL SOLUTIONS, INC, NATIC TAYLOR & CO LLC, MORGAN WEALTH MANAGEMENT, MICEL FINANCIAL, LLC, MARK MADDOX FINANCIAL, LYLES WEALTH MANAGEMENT, LEIGH FINANCIAL SERVICES, JLP INVESTMENTS INC, JESSE J GRIFFIN JR, ILLUMINATION FINANCIAL ADVISORS, HYDEPARK WEALTH ADVISORS, HOLLAND WEALTH MANAGEMENT, HN FINANCIAL GROUP, GRANDVIEW WEALTH MANAGEMENT, GIBSON RETIREMENT PLANNING, FRONT PAGE FINANCIAL ADVISORS, LLC, FOOTHILLS FINANCIAL STRATEGIES, FINANCIAL INTEGRITY GROUP, FALK WEALTH MANAGEMENT, EXCLUSIVE FINANCIAL STRATEGIES, DEMPSEY, LORD, SMITH, LLC, DEMPSEY LORD SMITH, LLC, DEANS CONSULTING, CRESCENT WEALTH MANAGEMENT, CRESCENT WEALTH ADVISORS, CORNERSTONE FINANCIAL, LLC, CORE CAPITAL MARKETS, LLC, COLABORATIVE INVESTMENT MANAGEMENT, CLAIR LORD JARRETT, CHARLES MURPHY INSURANCE, BROCK FINANCIAL SERVICES, INC., BREEN FINANCIAL, BLANTON FINANCIAL GROUP, BELMONT CAPTIAL ADVISORS, BAXTER INSURANCE AGENCY, AEGEUS FINANCIAL SOLUTIONS, INC., AAPT, LLC

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in GWG L Bonds or GPB Capital Funds through Dempsey Lord Smith, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

On June 23, 2022, the Financial Industry Regulatory Authority (FINRA) ordered National Securities Corporation (“NSC”) to pay nearly $9 million in monetary fines and restitution for violating various SEC, NASD, and FINRA rules, including negligently omitting material facts to retail investors connected with offerings related to GPB Capital Holdings, LLC (“GPB Capital”). NSC consented to the sanctions after FINRA alleged that between April 2018 and July 2018, NSC negligently omitted to tell investors in two offerings related to GPB Capital that the issuers failed to timely make required filings with the Securities and Exchange Commission (“SEC”), including audited financial statements.

Additionally, upon information and belief, National Securities Corporation was a part of a network of broker-dealers who sold the speculative, high-risk, and illiquid GWG L Bonds. GWG Holdings, Inc., which stopped making interest and maturity payments to GWG L Bond investors in January 2022, filed for Chapter 11 bankruptcy in April 2022. Many GWG L Bond investors are skeptical that they will receive any significant portion of their principal back. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

Investors who purchased GWG L Bonds or any GPB Capital Funds through National Securities Corporation or any other broker-dealer are encouraged to contact Iorio Altamirano LLP (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

See Also:

GWG L Bond Investor Recovers Losses After Filing a FINRA Arbitration Claim

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy

GPB Investors Have Won Monetary Awards in 10 of 11 Arbitration Cases This Past Year

About GWG L Bonds

An L bond is a financial product created by GWG Holdings, Inc. The L Bonds are speculative, high-risk, and illiquid alternative investment offerings.

Initially, GWG Holdings pooled money from bond investors to purchase life insurance policies on the secondary market, paid the policy premiums, and then collected the death benefit when the insured individual passed away. However, beginning in 2018, GWG Holdings used the investor capital to invest in a new business model, exposing the company to riskier alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG Holdings offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%.

GWG L Bonds were likely not suitable for investors with a low-to-moderate risk tolerance or investors who had liquidity needs.

On April 20, 2022, GWG filed for Chapter 11 bankruptcy. According to the bankruptcy filings, the SEC has been investigating the sales practices of brokerage firms related to GWG L Bonds. It has been recently reported that the SEC’s investigation began in May 2021. We believe that this regulatory investigation includes the sales practices of Emerson Equity and its regional broker-dealers, such as National Securities Corporation.

Last month, the SEC’s investigation led to its first lawsuit as the regulator filed a lawsuit against Western International Securities, Inc., and several of its brokers in a federal court in California. The firm is accused of failing to perform due diligence regarding the inherent risks associated with GWG L Bonds and recommending these risky products to customers in situations where they were not in the best interest of the firm’s customers.

Brokerage firms like Western International Securities, Inc. and National Securities Corporation are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Investors who purchased GWG L Bonds should contact New York Securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation to review their legal rights.

About GPB Capital Funds

GPB Capital is a New York-based alternative asset management firm founded in 2013. GPB Capital serves as the general partner for limited partnerships formed to acquire income-producing companies. GPB Capital had four flagship funds, which were sold as private placement offerings:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

In February 2021, the SEC charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. In addition, David Gentile, the owner and chief executive of GPB; Jeffry Schneider, the owner and CEO of Ascendant Capital LLC; and Jeffrey Lash, a former GPB managing partner, are all facing criminal and civil fraud charges. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

GPB Capital raised capital from private retail investors through private placement offerings that were sold by approximately sixty broker-dealers and investment advisory firms across the country, including National Securities Corporation. In total, the GPB funds have collectively raised over $1.8 million in capital from investors. While GPB Capital and financial advisors used promises of steady, 8% dividends from investment gains to lure investors, “a significant portion of GPB’s distributions were paid directly from investor funds,” according to numerous civil and criminal complaints. There are serious concerns that broker-dealers may have failed to conduct reasonable due diligence about GPB Capital and the GPB funds.

FINRA has stated that “reasonable diligence” means that the firm’s and/or broker’s due diligence “must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.”

Brokerage firms may have failed to conduct reasonable diligence into GPB Capital and the GPB funds before selling the private placement offerings to their customers. The firms’ compliance departments likely ignored or missed many red flags.

For example, according to the SEC’s complaint, beginning in August 2015, GPB Automotive Portfolio LP began to use investor funds to make distributions to other investors. However, GPB Automotive Portfolio’s private placement memorandum stated that distributions would be made from the limited partnership’s operations. The private placement memorandum was updated in June 2016 to disclose that the limited partnership may use investor capital to make distributions, but it had “no present plans to do so,” despite already doing so. These statements were false and misleading. At the time the PPM was issued, GPB Automotive Portfolio had used over $2.5 million of investor capital to pay distributions.

The false statements by GPB Capital were also discoverable by brokerage firms who sold the private placement offering to retail investors for large up-front commissions, including National Securities Corporation. For example, in 2016, GPB Automotive Portfolio’s financial reports revealed that the fund made $14.3 million in distributions to investors; however, it recorded only $5.4 million of income from operations. The significant gap between the amount in distributions paid out to investors and the entity’s operating income should have been a huge red flag to brokerage firms. Instead, the red flag was ignored, and GPB Automotive Portfolio was sold to retail investors by brokerage firms and investment advisory firms. This is just one example of how brokerage firms may have failed their due diligence obligations.

As a result of due diligence failures, or other sales practice violations, GPB investors may have legal claims against brokerage firms or investment advisory firms.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019061652404

FINRA and National Securities Corporation entered into an AWC on June 23, 2022, after FINRA alleged that National Securities Corporation violated various SEC, NASD, and FINRA Rules. As part of the allegations, FINRA alleged between April 2018 and July 2018, NSC negligently omitted to tell investors in two offerings related to GPB Capital that the issuers failed to timely make required filings with the SEC, including filing audited financial statements. By virtue of the foregoing, NSC violated FINRA Rule 2010. Specifically, FINRA alleged:

• From 2013 through 2018, GPB Capital launched several limited partnerships, each focused on acquiring controlling interests in certain private-sector companies.
• As relevant here, the GPB Capital limited partnerships included GPB Automotive Portfolio, LP (Automotive Portfolio), which was formed in 2013 to acquire and operate automotive dealerships, and GPB Holdings II, LP (Holdings II), which was formed in 2015 primarily to acquire and operate companies in the automotive retail and managed IT sectors.
• These GPB Capital limited partnerships raised capital by selling limited partnership interests to retail investors. GPB Capital sold the limited partnership interests through, among other channels, broker-dealers.
• The securities GPB Capital sold, including those issued by Automotive Portfolio and Holdings II, were not registered. Instead, the limited partnership interests were sold pursuant to Regulation D of the Securities Act of 1933.
• As a condition of the offerings, only accredited investors were permitted to purchase the GPB Capital limited partnership interests.
• After conducting due diligence on each offering, NSC approved Holdings II for sale by the firm’s registered representatives in December 2015 and then approved Automotive Portfolio in May 2016.
• Making a negligent misrepresentation or omission of a material fact to customers violates FINRA Rule 2010, as it is inconsistent with just and equitable principles of trade.
• On July 10, 2017, GPB Capital filed a lawsuit in New York against one of its former operating partners who had allegedly failed to acquire certain automotive dealership interests (the New York Litigation). In connection with the New York Litigation, the former partner asserted various counterclaims against GPB Capital and alleged that GPB Capital had falsified financial statements to conceal that GPB Capital was defrauding its investors. GPB Capital denied the former partner’s allegations, and the litigation remains pending.
• On April 27, 2018, GPB Capital released what it characterized as important updates regarding the audited financial statements for certain of its limited partnerships, including Automotive Portfolio and Holdings II. The letters, which were sent to broker-dealers that sold GPB Capital-related investments, including NSC, stated that GPB Capital was in the process of registering certain classes of securities issued by certain of the limited partnerships, including Automotive Portfolio and Holdings II, with the SEC. As part of that process, Automotive Portfolio and Holdings II were required to file audited financial statements. The letters further stated that the delivery of Automotive Portfolio’s and Holdings II’s audited financial statements (which were due to be filed by April 30, 2018) would be delayed pending the completion of a forensic audit. Specifically, GPB Capital disclosed that it and its auditors “determined that it would be prudent to hire a third-party firm to complete a forensic audit in order to endeavor to put [the former partner’s] counterclaims and other allegations to rest.” The offering documents for Automotive Portfolio and Holdings II were not timely amended to disclose that the partnerships would be delayed in filing their audited financial statements with the SEC.
• While NSC received the letters from GPB Capital notifying it of the delays and GPB Capital’s stated intention to complete a forensic audit, it sold 115 limited partnership interests in Automotive Portfolio and eight limited partnership interests in Holdings II after that announcement. The principal value of those sales, which occurred between April 30, 2018, and July 11, 2018, totaled approximately $8.7 million. NSC received a total of $701,480 in commissions from the sales.
• In connection with these sales, however, NSC representatives did not inform the customers that Automotive Portfolio and Holdings II had not timely filed their audited financial statements with the SEC or the reasons for the delay. The delay in filing audited financial statements was material information that should have been disclosed.
• Therefore, by negligently omitting material facts, NSC violated FINRA Rule 2010.

National Securities Corporation (CRD No. 7569)

National Securities Corporation (NSC) has been an SEC-registered broker-dealer and FINRA member since 1947. The firm, which is based in Boca Raton, Florida, is licensed to sell securities in 53 U.S. states and territories. NSC currently has a roster of approximately 574 registered brokers across the country and 119 branch offices.

The broker-dealer has also used the names Nat’l Securities Corp, Washington National Securities Corporation, NTL Insurance Agency, NSC Insurance Agency, National Securities of Washington, and National Securities Corp of Washington State to conduct business.

NSC has 82 different regulatory disclosures, according to the firm’s public disclosure report with FINRA.

In April 2022, NSC was censured, fined $300,000, and ordered to pay $363,447.67 in disgorgement (AWC No. 2019064508801). NSC contravened Section 17(a)(3) of the Securities Act of 1933 and violated FINRA Rules 2010 and 3110 by deceiving investors in connection with its sales of a “pre-IPO” private placement offering, failing to reasonably enforce its written supervisory procedures (WSPs), and failing to reasonably supervise the head of its “pre-IPO” offering business.

In May 2011, NSC was censured and ordered to pay $175,000 in partial restitution to investors in a private offering (AWC No. 2009019068201). NSC violated NASD Rules 2310, 3010, and 2110 and FINRA Rule 2010 when it failed to conduct reasonable due diligence and have a reasonable basis for recommending two private offerings.

Financial institutions like National Securities Corporation must supervise financial advisors and customer accounts properly. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in GWG L Bonds or GPB Capital Funds through National Securities Corporation, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

GPB Capital investors are encouraged to contact securities arbitration law firm Iorio Altamirano LLP to review their legal rights and options.

Original Post:

SEC to Seek Receivership for GPB Capital

According to news reports, the Securities and Exchange Commission (SEC) will seek to place GPB Capital Holdings LLC into receivership to return money to “defrauded investors.” The SEC is said to be prepared to present the plan to a federal judge in response to GPB founder David Gentile’s appointment of three new managers for the firm last month. GPB Capital is currently operating under a court-appointed monitor tasked with overseeing the firm’s assets and preventing it from taking actions that would harm investors.

The SEC alleges that the GPB founder’s actions undermine the court’s authority. Specifically, the SEC alleges that the move is meant to seize control of GPB Capital and its investment funds. “Through his actions of recent days, [Mr.] Gentile appears intent on seizing the controls of GPB Capital Holdings LLC and its investment funds, including their respective bank accounts, which hold nearly $1 billion that is earmarked for the victims of his fraud.” The SEC further stated that Mr. Gentile was trying to “usurp the court’s authority over the monitorship.”

In a June 2 letter to the U.S. District Judge who is presiding over the civil fraud case against GPB in the U.S. District Court for the Eastern District of New York, the SEC argued that Mr. Gentile’s actions violated the court order appointing a monitor to oversee the firm and that the violation represented a material breach in that order that permits the agency to convert the monitorship to a receivership to protect investor assets.

The SEC further stated that most of GPB’s assets, “all of which belong to investors defrauded by Gentile,” have been liquidated and that “It is time to get money back to investors” through a court-supervised receivership.

Thousands of investors are still waiting for news about how the GPB funds will be distributed. The timeline of when potential distributions may be made and the amounts paid remains uncertain.

New York securities arbitration law firm Iorio Altamirano LLP continues to investigate and evaluate potential claims for investors who have purchased GPB Automotive Portfolio, LP, GPB Holdings, LP, GPB Holdings II, LP, GPB Waste Management, LP, or GPB Cold Storage, LP.

GPB Capital investors are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights. Iorio Altamirano LLP has represented numerous GPB investors in recovering losses.

See Also:

GPB Investors Worried After GPB Automotive’s 10-K Annual Report Filing

GPB Investors Encouraged to File Arbitration Claims in 2022 to Preserve Legal Rights

GPB Investors Have Won Monetary Awards in 10 of 11 Arbitration Cases This Past Year

What Can GPB Investors Do?

GPB Capital investors should immediately contact a securities arbitration law firm to review their legal rights.

Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

Iorio Altamirano LLP is a national securities arbitration law firm based in New York, NY. The law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf to recover your losses. We generally represent clients on a contingency fee basis. If we do not obtain a recovery, you do not owe us a legal fee.

The complaint alleges that although the prospectus for the June 2020 offering stated that L Bonds were only suitable for customers with “substantial financial resources,” Western International did not set any criteria or thresholds for its customers to invest in L Bonds. Western International Securities also did not restrict the sale of L Bonds to customers with certain risk profiles or investment objectives.

The complaint also alleges that the named brokers misunderstood important issues regarding GWG Holdings, Inc. and the GWG L Bonds, including that GWG significantly changed its business model beginning in 2018 and that GWG L Bonds were not directly collateralized by life insurance policies. As a result, the brokers recommended GWG L Bonds to retail customers without a reasonable basis to believe that the investments were in the customers’ best interest.

Iorio Altamirano LLP, a law firm that represents GWG L Bond investors in filing individual claims to recover investment losses, encourages all investors who purchased L Bonds through Western International Securities, Inc. to contact the law firm for a free consultation to evaluate their options. Collectively, Iorio Altamirano LLP has filed claims seeking to recover over $2.5 million in losses and damages from brokerage firms for the improper sale of GWG L Bonds.

Original Post:

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

Iorio Altamirano LLP, a securities arbitration law firm based in New York, NY, is investigating potential securities arbitration claims against Western International Securities, Inc. for its sale of L Bonds issued by GWG Holdings, Inc. Upon information and belief, Western International Securities, Inc. was a part of Emerson Equity LLC’s network of broker-dealers who sold the speculative, high-risk, and illiquid GWG L Bonds. Iorio Altamirano LLP has spoken to several retail investors who purchased GWG L Bonds through the recommendation of broker Dan Beech, who was registered with Western International Securities in Westlake Village, CA, from May 10, 2016, until March 9, 2022.

On April 20, 2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy, allowing GWG Holdings to propose a reorganization plan. However, many GWG L Bond investors, who have not received interest or maturity payments since January 2022, are skeptical that they will see a return of their invested capital. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

According to the bankruptcy filings, the SEC has been investigating the sales practices related to GWG L Bonds. We believe that this investigation includes the sales practices of Emerson Equity and its regional broker-dealers, such as Western International Securities, Inc.

Brokerage firms like Western International Securities, Inc. are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About GWG L Bonds

An L bond is a financial product created by GWG. Initially, GWG pooled money from bond investors to purchase life insurance policies on the secondary market, pay the policy premiums, and then collect the death benefit when the insured individual passed away. However, beginning in 2018, GWG used the investor capital to invest in a new business model, which exposed the company to much risker alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG Holdings offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They are secured by the assets of GWG Holdings and a pledge of all of the common stock by its largest stockholders.

GWG L Bonds were likely not suitable for investors with a low-to-moderate risk tolerance or investors who had liquidity needs.

Investors who purchased GWG L Bonds should contact New York Securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation to review their legal rights.

Western International Securities, Inc. (CRD No. 39262)

Western International Securities, Inc. is an SEC-registered broker-dealer and investment advisor based in Pasadena, CA. The firm was founded in Colorado in April 1995 and has been a FINRA member since November 1995.

Western International Securities, Inc., which is currently licensed to sell securities in 53 U.S. states and territories, currently has a roster of approximately 456 registered brokers and investment advisors across the country.

According to the firm’s public disclosure report, it has been sanctioned 11 times by regulators for alleged misconduct. The most recent sanction was settled in 2021.

Steven R. Graham (CRD No. 1977736)

Steven Graham has been a dually registered broker and registered investment advisor with Western International Securities, Inc. in Valencia, CA, since September 4, 2020. Mr. Graham has 32 years of experience in the securities industry and has been associated with six different firms.

According to the SEC’s complaint against Western International and Mr. Graham (the “Complaint”), Mr. Graham recommended and sold over $1 million worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $32,500 in commissions. The Complaint alleges that Mr. Graham failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Graham violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

The Complaint details Mr. Graham’s recommendations to two retail customers:

• In or around November 2020, Mr. Graham recommended that a 79-year-old retired truck driver purchase $100,000 in a two-year GWG L Bond. The customer had a moderate risk tolerance and investment objectives that did not include speculation. The customer had limited general investment knowledge and limited knowledge of bonds. At the time of his GWG L Bond purchase, the customer’s annual income was $35,000, and his liquid net worth was $300,000. The GWG L Bonds comprised of 10% of the customer’s net worth and 33% of his liquid net worth. The GWG L Bond was held in the customer’s individual account. In the “rationale” section of the firm’s disclosure forms, Mr. Graham wrote in full: “Customer is seeking a high rate of interest from funds sitting in a bank savings at .05%. They will utilize the interest for supplemental income each month. The Complaint alleges that Mr. Graham did not specify why he believed that the GWG L Bonds were in the customer’s best interest, as opposed to many other investments that offered greater than .05% interest rates. The SEC contends that Mr. Graham’s bases for believing that the $100,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and generic. The Complaint alleges that Mr. Graham did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Graham’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.
• In or around January 2021, Mr. Graham recommended that a 65-year-old retiree purchase $100,000 in a 3-year GWG L Bond. The customer had a moderate risk tolerance and investment objectives that did not include speculation. The customer’s investor profile with the firm represented that he had no general investment knowledge and limited knowledge of bonds. The customer had an annual income of $85,000, a net worth of $1.1 million, and a liquid net worth of $500,000. The GWG L Bonds constituted 9% of the customer’s net worth and 20% of his liquid net worth. The GWG L Bond was held in the customer’s individual retirement account. In the “rationale” section of the firm’s disclosure forms, Mr. Graham wrote that the customer was “seeking an additional income stream to supplement his retirement income” and that he wanted to “leverage a small portion of his IRA portfolio to accomplish this.” However, as pointed out in the SEC’s Complaint, the GWG L Bond was not a “small portion” of the customer’s IRA portfolio. In actuality, the $100,000 GWG L Bond investment constituted 50% of the IRA held at Western International. Mr. Graham’s supervisor and Western International’s compliance department failed to identify the discrepancy. The Complaint alleges that Mr. Graham’s bases for believing that the $100,000 GWG L Bond purchase was in the customer’s best interest were unreasonable, vague, generic, and premised on an erroneous assumption. The SEC contends that Mr. Graham did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation was in the customer’s best interest. The Complaint also alleges that Mr. Graham’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Finally, the Complaint alleges that although Mr. Graham understood that there had been a change in GWG’s business, he failed to take the necessary actions to understand the company’s new business model or assets.

Andy Ravi Gitipityapon (CRD No. 4092978)

Andy Gitipityapon has been a dually registered broker and registered investment advisor with Western International Securities, Inc. in Northridge, CA, since April 9, 2018. Mr. Gitipityapon has 22 years of experience in the securities industry and has been associated with five different firms.

According to the SEC’s complaint against Western International and Mr. Gitipityapon (the “Complaint”), Mr. Gitipityapon recommended and sold approximately $330,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately nearly $10,000 in commissions. The Complaint alleges that Mr. Gitipityapon failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Gitipityapon violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Gitipityapon, the Complaint made the following allegations:

• Mr. Gitipityapon took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Mr. Gitipityapon did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.
• Mr. Gitipityapon did not know how GWG, after it became entangled with Beneficient, made its money or whether Beneficient generated revenues.

The Complaint details one of the recommendations made by Mr. Gitipityapon. In or around August 2020, Mr. Gitipityapon recommended that a 54-year-old restaurant server invest $30,000 into a two-year GWG L Bond. The customer had a moderate risk tolerance, and her investment objectives did not include speculation. She had an annual income of $75,000, a net worth of $400,000, and a liquid net worth of $150,000. The customer’s $30,000 GWG L Bond represented 7.5% of her net worth and 20% of her liquid net worth. The GWG L Bond was purchased in her individual account. In the “rationale” section of the firm’s disclosure forms, Mr. Gitipityapon wrote in full: ” Client had a CD that came due and does not need the funds for a few years. She likes the interest rate of the bond and understands the risk of the GWG bond. This bond meets all of her need and objectives.” The SEC contends that Mr. Gitipityapon’s bases for believing that the GWG L Bond purchase was in the customer’s best interest were unreasonable, vague, and generic. Accordingly, Mr. Gitipityapon did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Gitipityapon’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Thomas Brian Swan (CRD No. 1698430)

Thomas Swan has been a registered broker with Western International Securities, Inc. in Westlake Village, CA, since May 27, 2008. Since October 14, 2014, he has also been an SEC-registered investment advisor with the firm. Mr. Graham has 33 years of experience in the securities industry and has been associated with nine different firms.

According to Mr. Swan’s public disclosure report with FINRA, he has been the subject of at least two customer complaints. In addition, in 2005, the California Department of Insurance alleged that Mr. Swan breached his fiduciary responsibility. The matter was settled, and Mr. Swan paid a fine of $20,000.

According to the SEC’s complaint against Western International and Mr. Swan (the “Complaint”), Mr. Swan, a resident of Acme, Washington, recommended and sold approximately $297,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $12,500 in commissions. The Complaint alleges that Mr. Swan failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Swan violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Swan, the Complaint made the following allegations:

• Mr. Swan took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Mr. Swan erroneously bellied that GWG was continuing to invest in life insurance policies after 2018.
• Mr. Swan did not understand the risks of the GWG L Bonds. He erroneously described the L Bones as relatively safe when in fact, they contained a “high degree of risk.”
• Mr. Swan did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.

The Complaint details two of Mr. Swan’s GWG L Bond recommendations:

• In or around August 2020, Mr. Swan recommended that a 66-year-old retiree invest $55,000 into a seven-year GWG L Bond. The customer had an annual income of $30,000, and her investment objectives did not include speculation. The GWG L Bonds comprised of 10% of the customer’s liquid net worth. She had previously informed Mr. Swan that she did not want any capital risk to the money that provides the income portion of her retirement savings. In the Client Disclosure Form that accompanied the customer’s GWG L Bond purchase, Mr. Swan described her as “a conservative investor.” Neither Mr. Swan’s supervisor nor Western International Securitas’s compliance department identified this discrepancy. During a previous review of her IRA investments with Mr. Swan, the customer had told him she wanted to earn income safely without risking her principal. The SEC contends that Mr. Swan’s bases for believing that the $55,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and unsupported. The Complaint alleges that Mr. Swan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Swan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.
• In or around August 2020, Mr. Swan recommended that another 66-year-old retiree invest $80,000 into a seven-year GWG L Bond. The customer had a moderate-conservatives risk tolerance and identified preservation of capital as one of her investment objectives, but not speculation. The customer had an annual income of $75,000, a net worth of $1.5 million, and a liquid net worth of $900,000. She had limited general knowledge about investments and limited knowledge of bonds. The GWG L Bonds were purchased in her individual account. The SEC contends that Mr. Swan’s bases for believing that the $80,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and unsupported. Accordingly, the Complaint alleges that Mr. Swan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Swan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Nancy Ellen Cole (CRD No. 2900724)

Nancy Cole has been a dually registered broker and investment advisor with Western International Securities, Inc. in Sacramento, CA, since August 29, 2008. Ms. Cole has 24 years of experience in the securities industry and has been associated with five different firms, including one firm that has since been expelled from the industry by FINRA.

According to Ms. Cole’s public disclosure report with FINRA, she has been the subject of at least one customer complaint.

According to the SEC’s complaint against Western International and Mr. Swan (the “Complaint”), Ms. Cole recommended and sold approximately $250,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $10,000 in commissions. The Complaint alleges that Ms. Cole failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Ms. Cole violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Ms. Cole, the Complaint made the following allegations:

• Ms. Cole took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for her misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Ms. Cole did not know about GWG’s business combination with Beneficent until several months after she had recommended GWG L Bonds to customers. At the time that she had sold $250,000 worth of GWG L Bonds to two customers, she erroneously believed GWG was continuing to invest in life insurance policies.
• Ms. Cole did not understand the risks of the GWG L Bonds. She erroneously described the L Bones as relatively safe when in fact, they contained a “high degree of risk.”

The Complaint details Ms. Cole’s GWG L Bond recommendations to a married couple. In or around December 2020, Ms. Cole recommended that a married couple purchase $250,00 worth of two-, three-, five-, and seven-year GWG L Bonds. At the time of the recommendations, the customers were 67 and 61 years old. The 67-year-old customer was retired. Ms. Cole described the customers as “not risk-takers” and “relatively conservative.” Their investment objectives did not include speculation. They had limited general knowledge about investments and limited knowledge of bonds. Collectively, the married couple had an annual income of $106,000 and a liquid net worth of $760,000. The GWG L Bonds, which were held in personal retirement accounts and a joint investment account, comprised 33% of their liquid net worth. The SEC contends that Ms. Cole’s bases for believing that the $250,000 GWG L Bond investment was in the customers’ best interest were unreasonable. Accordingly, the Complaint alleges that Ms. Cole did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe her recommendations of the GWG L Bonds were in the customers’ best interest.

Patrick Michael Egan (CRD No. 2973478)

Patrick Egan has been a registered broker with Western International Securities, Inc. in Pasadena, CA, and Glendora, CA, since January 22, 1998. Since July 30, 2007, he has also been an SEC-registered investment advisor with the firm. Mr. Egan has 24 years of experience in the securities industry and has been associated with two different firms.

According to the SEC’s complaint against Western International and Mr. Egan (the “Complaint”), Mr. Egan recommended and sold approximately $184,500 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated at least $5,397 in commissions. The Complaint alleges that Mr. Egan failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Egan violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Egan, the Complaint made the following allegations:

• Mr. Egan took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Mr. Egan erroneously believed that GWG’s transactions with Beneficient were not significant.
• Mr. Egan acknowledged that the 2020 Prospectus described the GWG L Bonds as high risk but disregarded that disclosure.
• Mr. Egan did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.
• Mr. Egan acknowledged that he should have reviewed Beneficient’s financial statements and admitted he did not do so but rather erroneously assumed that Beneficient was profitable.

The Complaint details one of Mr. Egan’s GWG L Bond recommendations. In or around August 2020, Mr. Egan recommended that a 75-year-old retiree with a moderate-conservative risk profile invest $20,000 into a 3-year GWG L Bond. The customer had an annual income of $50,000, a net worth of $250,000, and a liquid net worth of $250,000. He did not include speculation as an investment objective and had limited knowledge of investments in general and of bonds in particular. The GWG L Bonds, which were held in the customer’s individual account, represented 8% of both his liquid and total net worth. In the “rationale” section of the firm’s disclosure forms, Mr. Egan wrote in full: “Client had extra cash in the bank and wanted to earn more interest than can be done in his bank. Client will also have a large cash balance in his bank account in addition to the $20,000 at GWG.” According to the Complaint, besides the rationale section of the Client Disclosure Form, Mr. Egan did not document anywhere his bases for believing that the $20,000 GWG L Bond purchase was in the customer’s best interest. In addition, Mr. Egan did not document why he chose to recommend the GWG L Bonds to the customer as opposed to many other investments that offered higher interest rates than a bank account. The SEC contends that Mr. Egan’s bases for believing that the $20,000 GWG L Bond investment was in the customer’s best interest were unreasonable and not supported by the facts. Accordingly, the Complaint alleges that Mr. Egan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Egan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Dan Beech (CRD No. 6169844)

Dan Beech is a stockbroker registered with Western International Securities, Inc. in Westlake Village, CA, from May 10, 2016, to March 9, 2022.

Upon information and belief, while registered as a broker with Western International Securities, Inc., Mr. Beech recommended and sold GWG L Bonds to retail investors. Iorio Altamirano LLP is investigating potential securities arbitration claims arising out of Mr. Beech’s sales practices and Western International Securities, Inc.’s supervision of those sales practices.

Mr. Beech has eight years of experience in the securities industry and has been registered with five different firms. He is currently registered with Innovation Partners LLC.

According to Mr. Beech’s public disclosure report, he has had at least two customer complaints. In August 2021, a customer filed a written complaint alleging $62,500 in damages. Mr. Beech settled the matter for the total amount of the alleged damages. In 2019, a customer filed a lawsuit alleging that Mr. Beech made an unsuitable recommendation related to a Real Estate Investment Trust (“REIT”). The dispute was settled for monetary compensation by Western International Securities, Inc.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings through Western International Securities, Inc., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may call the firm toll-free at (646) 330-4624.

**Updates: June 16, 2021** This blog post has been modified from the original post to include individual sections on brokers Steven Graham, Andy Gitipityapon, Thomas Swan, Nancy Cole, and Patrick Egan.

Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar. Despite the unwelcomed news, GWG L bond investors are not without recourse. Many retail investors, including those represented by securities arbitration law firm Iorio Altamirano LLP, are filing securities arbitration claims against brokerage firms that sold these speculative, high-risk, and illiquid financial products. These actions are separate and in addition to the bankruptcy proceedings.

GWG Holdings’ bankruptcy filing revealed for the first time that the ongoing investigation by the United States States Securities and Exchange Commission (SEC) includes an examination of sales practices of the GWG L Bonds by the Selling Group, including Emerson Equity LLC and its network of regional broker-dealers. According to the recent bankruptcy filing, the SEC issued subpoenas and document requests to individual brokerage firms beginning in late-2021.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

GWG L Bonds and Brokerage Firm Liability

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. The network of regional broker-dealers who sold L Bonds and shared in the selling commissions included the following firms, as well as other broker-dealers:

• Centaurus Financial, Inc.
• Great Point Capital LLC.
• National Securities Corporation.
• Western International Securities, Inc.
• Aegis Capital, LLC.
• Dempsey Lord Smith, LLC.
• Coastal Equities, Inc.
• International Assets Advisory, LLC.
• Arete Wealth Management, LLC.
• Capital Investment Group, Inc.
• Lifemark Securities, Corp.
• Westpark Capital, Inc.
• Ausdal Financial Partners, Inc.
• Moloney Securities.
• IFP Securities, LLC.
• Center Street Securities.
• Cabot Lodge Securities LLC.
• Kingswood Capital Partners, LLC.
• American Trust Investment Services, Inc.
• Ages Financial Services, LTD.
• Landolt Securities, Inc.
• Intervest International Equities Corporation.
• Titan Securities.
• NI Advisors.
• JRL Capital Corporation.
• The FIG Group, LLC.
• M Stevens Securities, LLC.

Brokerage firms are required to make investment recommendations that are suitable and in the best interest of their customers. GWG’s L Bonds are speculative, high-risk, and illiquid securities sold as private placement offerings by brokerage firms across the country. The L Bonds were likely not suitable for investors with a low or moderate risk tolerance or investors who had liquidity needs.

Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Through the course of Iorio Altamirano LLP’s investigation, investors informed the firm that they were not aware that GWG significantly changed its business model beginning in 2018 or that GWG used investor capital to pay out high distributions to other GWG L bond investors in a Ponzi-like scheme.

When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any retail investor. There are serious concerns that some broker-dealers recommended GWG’s L Bonds to customers without first conducting sufficient due diligence on the GWG L bonds or GWGH.

How to Recover Losses or Obtain a Free Consultation

In light of the bankruptcy filing, L bond investors are encouraged to immediately contact Iorio Altamirano LLP to review their legal rights. Iorio Altamirano LLP is representing numerous GWG L bond investors in filing securities arbitration claims against firms such as Emerson Equity LLC and Centaurus Financial, Inc. for sales practice violations connected to the solicitation and sale of GWG L Bonds.

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you or a loved one has invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

In addition, GPB Capital continues to disclose that it, along with its former principals and representatives, are subject to numerous material litigation, which may take substantial time (several years) to resolve, and an unknown amount of outflow of cash from the Partnership to cover judgments, and legal costs.

Frustrating limited partnership investors, GPB is advancing funds to its principals and representatives, including David Gentile, for legal costs that they may incur to defend themselves in such disputes. Mr. Gentile has been criminally charged with securities fraud for allegedly running a Ponzi-like scheme.

As a result of the legal reserves and escrows, GPB Automotive has disclosed that distributions to Limited Partners may be delayed or withheld until such reserve is no longer needed or the escrow period expires. Worse, if the amounts of such reserves or escrows are insufficient, GPB Automotive has disclosed that Limited Partners themselves might have to return prior cash distributions to fund these liabilities.

New York securities arbitration law firm Iorio Altamirano LLP continues to investigate and evaluate potential claims for investors who have purchased GPB Automotive Portfolio, LP, GPB Holdings, LP, GPB Holdings II, LP, GPB Waste Management, LP, or GPB Cold Storage, LP.

GPB Capital investors are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and review their legal rights. Iorio Altamirano LLP has represented numerous GPB investors in recovering losses.

See Also:

GPB Investors Encouraged to File Arbitration Claims in 2022 to Preserve Legal Rights

GPB Investors Have Won Monetary Awards in 10 of 11 Arbitration Cases This Past Year

GPB Automotive 10-K Filing (April 14, 2022)

GPB Automotive Portfolio, LP’s Annual Report for 2021 contains a wealth of disclosures that GPB investors should be aware of. The law firm of Iorio Altamirano LLP has combed through the lengthy filing and believes the following to be important disclosures:

• Despite completing the sale of nearly all of its revenue-generating assets for $880 million, GPB Automotive has only $535 million in total net assets in liquidation and no significant revenue-generating assets.
• GPB Automotive has commenced a plan to liquidate the Partnership’s remaining net assets and wind up the Partnership.
• The liquidation is not expected to be completed until December 31, 2024.
• As part of the United States Attorneys’ Office criminal proceedings against Mr. Gentile, Mr. Schneider, and Mr. Lash, which alleges conspiracy to commit securities fraud, as well as other charges, the USAO intends to seek criminal forfeiture.
• GPB Automotive may not be able to pay liquidating distributions to its limited partners at the times and in the amounts expected. The Partnership does not know the timing or amount of any liquidating distributions, as uncertainties exist as to the ultimate amount of its expenses associated with completing our monetization strategy, its liabilities, its operating costs, and amounts to be set aside for claims, obligations, and expenses during the liquidation and winding-up process, and the related timing to complete such transactions.
• If GPB Automotive fails to retain sufficient funds to pay the liabilities actually owed to its creditors, each Limited Partner receiving liquidating distributions could be liable for payment to its creditors for such Limited Partners’ pro-rata share of any shortfall, up to the amount actually distributed to such Limited Partner in connection with the dissolution.
• Limited Partners may not receive distributions to return their invested capital fully.
• GPB Automotive and GPB Capital are involved in material litigation arising from the Partnership’s operations, and they are subject to litigation risks. Resolving litigation disputes can be costly and time-consuming. As a result of outstanding litigation, the Partnership may incur significant legal fees.
• The Partnership has incurred expenses in advancing funds to the General Partner to pay for its attorney’s fees and costs in that lawsuit and will continue to incur expenses in that regard.
• In the event settlement discussions regarding class action lawsuits or any pending regulatory investigations are unsuccessful, any liability may require an outflow of cash from the Partnership. The amount and timing of any such outflow of cash are not estimable at this time.
• GPB anticipates that resolving its legal matters will likely take substantial time; some or all of the pending matters may not be resolved for several years.
• GPB Automotive is advancing funds to officers, directors, and representatives of the dealerships, as well as GPB, its principals, and representatives, for any reasonable costs they may incur in connection with defending themselves in such disputes as required by various agreements or governing law. This advancement of funds does not cover any potential future outcomes or settlements that result from these disputes.
• GPB Automotive established reserves or escrows for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated. The actual costs of resolving legal actions may be substantially higher or lower than the amounts reserved or placed in escrow for those actions. Distributions may be delayed or withheld until such reserves are no longer needed or the escrow period expires. If liabilities exceed the amounts reserved or placed in escrow, Limited Partners may need to fund the difference by refunding some or all distributions previously received.
• With respect to all significant litigation and regulatory matters facing GPB Automotive, GPB Capital, and the former dealerships, GPB Automotive has considered the likelihood of an adverse outcome. It is possible that GPB Automotive could incur losses about these matters that may have a material adverse effect on its operational results, financial condition, or liquidity in any future reporting period. GPB Automotive knows that GPB Capital, the general partner, is currently paying legal costs associated with these actions for itself and certain indemnified parties. The Partnership expects to provide partial reimbursement to the General Partner as required by various agreements or governing law, but the amount is not reasonably estimable at this time.
• GPB Automotive has identified material weaknesses in its internal controls. GPB Automotive will expend significant financial and other resources to comply with the requirements of being a public entity. These requirements may place a strain on our systems and resources. GPB Automotive expects to incur significant additional annual expenses related to its public company status and, among other things, to directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, and additional administrative expenses to GPB or affiliated entities to compensate them for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.
• Expenses related to GPB and Highline are significant. Despite having almost no revenue-generating assets, GPB Automotive disclosed that it needs to make substantial profits to avoid depletion of its assets and provide a return to our Limited Partners.

What Can GPB Investors Do?

GPB Capital investors should immediately contact a securities arbitration law firm to review their legal rights.

Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

Iorio Altamirano LLP is a national securities arbitration law firm based in New York, NY. The law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf to recover your losses. We generally represent clients on a contingency fee basis. If we do not obtain a recovery, you do not owe us a legal fee.

**Update: April 4, 2022** According to the Wall Street Journal, GWG Holdings, Inc. is preparing to file for Chapter 11 bankruptcy in the coming days.

Original Post:

GWG Holdings, Inc. Misses Deadline to File Its 2021 Annual Report with the SEC

On April 1, 2022, GWG Holdings, Inc. disclosed that it was unable to timely file its 2021 annual report with the United States Securities and Exchange Commission (“SEC”). GWG Holdings, Inc. has now failed to timely file annual reports with the SEC in three of the past four years. The latest missed deadline comes after the company defaulted on its financial obligations to GWG L Bond investors earlier this year.

The Notification of Late Filing filed by GWG Holdings, Inc. indicated that the company was unable to file its Annual Report on Form 10-K for the year ended December 31, 2021, because the company required additional time to complete its financial statements and related disclosures.

According to the notice, GWG Holdings, Inc. missed the deadline in part because Grant Thornton, LLP, the company’s prior independent auditor, resigned on December 31, 2021. The accounting firm that replaces Grant Thornton will be GWG Holdings, Inc.’s fourth different independent auditor since August 2019. GWG Holdings, Inc. has not yet engaged an auditor to audit its financial statements for the year ended December 31, 2021. The notice also indicated that the company is in the process of “reviewing potential candidates.”

For the past several months, GWG Holdings has been working with legal and financial advisors to evaluate its restructuring alternatives. According to the Wall Street Journal, GWG Holdings is also seeking rescue financing to avoid bankruptcy, but a Chapter 11 bankruptcy filing is on the table as a last resort.

Meanwhile, GWG L Bond investors remain worried about what is going to happen to their principal investments.

Many investors, including those represented by securities arbitration law firm Iorio Altamirano LLP, are filing securities arbitration claims against the selling broker-dealer in a bid to recover losses.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds

How to Recover Losses or Obtain a Free Consultation

In light of this most recent development, L bond investors are encouraged to contact Iorio Altamirano LLP, a leading securities arbitration law firm, to review their legal rights. Iorio Altamirano LLP is representing numerous GWG L bond investors in filing securities arbitration claims against firms such as Emerson Equity LLC and Centaurus Financial, Inc.for sales practice violations connected to the solicitation and sale of GWG L Bonds.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They were likely not suitable for investors with liquidity needs, low to medium risk tolerances, or senior or elderly investors.

If you or a loved one has invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may call the firm toll-free at (646) 330-4624.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

Original Post:

GWG L Bond Investor Update: GWG Holdings, Inc. Officially Defaults on Its Obligations to L Bond Investors – February 14, 2022

After missing interest and principal payments to L Bond investors on January 15, 2022, GWG Holdings, Inc. had a 30-day grace period to make the interest and maturity payments before it was officially in an event of default pursuant to the issuing documents for the L Bonds. The 30-day window for GWG Holdings to cure its deficiencies and meet its financial obligations to L Bond owners has now passed, and GWG Holdings is officially in an event of default.

On February 14, 2022, GWG Holdings, Inc. confirmed in a letter to investors that it will not make monthly interest and maturity payments on its L Bonds, or dividend payments to preferred stockholders. In addition, GWG holdings has confirmed that it will continue to defer requests for redemptions.

As a result of GWG Holdings, Inc.’s default, L Bond owners are left holding securities that cannot be sold or redeemed, and no longer paying their promised income.

New York securities arbitration law firm Iorio Altamirano LLP continues to evaluate potential claims for L Bond owners.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, visit our firm’s investigation page: Iorio Altamirano LLP’ Investigation of GWG L Bonds

GWG’s February 14, 2022 Letter to Investors

On February 14, 2022, GWG Holdings sent a notice to investors that the company would not make monthly interest and maturity payments on its L Bonds or dividend payments to preferred stockholders while the company continues to identify and evaluate restructuring alternatives with its advisors.

The company, which also disclosed that it would continue not to honor redemption requests at this time, stated that the process of identifying and considering various alternatives would take at least another three to four weeks and may take longer.

How to Recover Losses or Obtain a Free Consultation

In light of this most recent development, L bond investors are encouraged to contact Iorio Altamirano LLP, a leading securities arbitration law firm, to review their legal rights. Iorio Altamirano LLP is representing numerous GWG L bond investors in filing securities arbitration claims against firms such as Emerson Equity LLC and Centaurus Financial, Inc. for sales practice violations connected to the solicitation and sale of GWG L Bonds.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They were likely not suitable for investors with liquidity needs, low to medium risk tolerances, or senior or elderly investors.

If you or a loved one has invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may call the firm toll-free at Alternatively, you may call the firm toll-free at (646) 330-4624.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

Iorio Altamirano LLP has been contacted by numerous senior and elderly retail investors who were recommended and sold GWG’s L Bonds by Mr. Williams. GWG’s L Bonds are speculative, high-risk, and illiquid securities that were sold as private placement offerings. Brokerage firms received a commission of up to 5% of the principal amount sold.

On January 15, 2022, GWG Holdings Inc. missed interest and principal payments to L bond investors. The company is also reportedly seeking rescue financing in an effort to avoid bankruptcy after facing a series of accounting issues, financial stress, and an SEC investigation. In addition, GWG’s independent auditor resigned at the end of 2021, and the company has disclosed that its 2021 financials are not likely to be completed on time. These are just a few recent developments that have GWG L Bond investors concerned.

GWG L Bonds were likely not suitable for investors with a low-to-moderate tolerance for risk or investors who had liquidity needs.

Investors who purchased the L Bonds offered by GWG Holdings through Mark Williams or Centaurus Financial, Inc. are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

See Also:

GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy

Mark John Williams (CRD No. 4061842)

Mark John Williams has 22 years of experience in the securities s industry and has been registered as a broker with the following firms:

• Kingswood Capital Partners, LLC, from November 2021 through the present.
• Forta Financial Group, Inc., from March 2021 until October 2021.
• Centaurus Financial, Inc., from November 2015 through March 2021.
• P. Turner & Company, L.L.C., from November 2007 through October 2015.
• QA3 Financial Corp., from April 2006 through November 2007.
• FSC Securities Corporation, from July 2001 through April 2006.
• Advantage Capital Corporation in July 2001.
• Merrill Lynch, Pierce, Fenner & Smith Incorporated, from January 2000 to June 2001.

According to his public disclosure report, Mr. Williams was the subject of a customer complaint in 2019. A customer alleged that from 2012 through March 2017, Mr. Williams recommended and misrepresented an unsuitable real-estate security. The customer did not file a securities arbitration complaint. Instead, the customer complained directly to the firms that employed Mr. Williams during the relevant time period. The firms, J.P. Turner & Company, L.L.C. and Centaurus Financial, Inc. denied any compensation to the customer. Mr. Williams also denied the allegations.

FINRA’s BrokerCheck tool can be used to obtain Mr. Williams’ complete and updated disclosure reports.

About the L Bonds

An L bond is a specialty high-yield bond created and issued by GWG Holdings.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They are secured by the assets of GWG Holdings and a pledge of all of the common stock by its largest stockholders.

Brokerage firms are required to make investment recommendations that are in the best interest of their customers. Financial advisors also have an obligation to be truthful and disclose all material facts and risks to customers when making investment recommendations. Firms and brokers are also required to conduct reasonable due diligence of products they offer before recommending them to any clients. Iorio Altamirano LLP is investigating whether Mr. Willaims and Centaurus Financial, Inc. met these obligations in connection with their sale of L Bonds to retail investors.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in GWG L Bonds as a result of a recommendation made by Mark Williams or Centaurus Financial, Inc., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may reach the firm by phone toll-free at (646) 330-4624.

On January 15, 2022, GWG Holdings Inc., a company known for selling life-insurance bonds, missed interest and principal payments to L bond investors. The company is also reportedly seeking rescue financing in an effort to avoid bankruptcy after facing a series of accounting issues, financial stress, and an SEC investigation.

GWG’s L Bonds are speculative, high-risk, and illiquid securities that were sold as private placement offerings.

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. Emerson Equity LLC, an SEC-registered broker-dealer and FINRA member based in San Mateo, California, received a commission ranging from 0.75% to 5.00% of the principal amount of the L Bonds sold. The firm also received additional compensation and commissions, up to 8% of the aggregate gross proceeds from the sale of L Bonds. The network of regional broker-dealers who shared in the commissions included Centaurus Financial, Inc., Aegis Capital, LLC, NI Advisors, Western International Securities, Inc., and over 100 other firms.

Brokerage firms are required to make investment recommendations that are in the best interest of their customers. Financial advisors also have an obligation to be truthful and disclose all material facts and risks to customers when making investment recommendations. Firms and brokers are also required to conduct reasonable due diligence of products they offer before recommending them to any clients. There are serious concerns that some broker-dealers recommended GWG’s L Bonds to individuals even though the product was not suitable for them. There are also concerns that firms failed to perform reasonable due diligence about GWG’s L Bond before selling the risky products to their customers.

Investors who purchased the L Bonds offered by GWG Holdings through Emerson Equity LLC, Centaurus Financial, Inc., Aegis Capital, LLC, NI Advisors, Western International Securities, Inc., or any other broker-dealer are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

See Also:

GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy

About the L Bonds

An L bond is a financial instrument created by GWG, which pooled money from bond investors to purchase life-insurance policies on the secondary market, and then used payouts from the policies when people died to repay investors.

GWG Holdings began selling L Bonds in 2012. According to a firm Form 8-K, it began selling a $2 billion L Bond offering in the summer of 2020 to a growing network of advisors from 127 firms.

GWG Holdings offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They are secured by the assets of GWG Holdings and a pledge of all of the common stock by its largest stockholders. According to the June 2020 offering prospectus, the key features and risks of the L Bonds include:

• Speculative, High-Risk, Illiquid: “Investing in our L Bonds may be considered speculative and involves a high degree of risk, including the risk of losing your entire investment…. The L Bonds are only suitable for persons with substantial financial resources and with no need for liquidity in this investment.”
• Illiquid: “We do not intend to list our L Bonds on any securities exchange during the offering period, and we do not expect a secondary market in the L Bonds to develop. As a result, you should not expect to be able to resell your L Bonds regardless of how we perform. Accordingly, an investment in our L Bonds is not suitable for investors that require liquidity in advance of their L Bond’s maturity date.”
• 6% charge to redeem early: “In the event we agree to redeem L Bond upon the request of an L Bond holder — other than after death, bankruptcy or total permanent disability— we will impose a redemption fee of 6% against the outstanding principal balance of the redeemed L Bond.
• Subordinate Debt: “We maintain senior borrowing arrangements that subordinate to our senior lenders the right to payment on, and the collateral securing, the L Bonds. In addition, these borrowing arrangements restrict our receipt of distributions from certain of our operating subsidiaries, subject to certain exceptions. These provisions will restrict cash flows available for payment of principal and interest on the L Bonds. From time to time we may add or replace senior lenders and the particular arrangements under which we borrow from them.”
• L Bonds Sold as “Units” of $1,000: L Bonds will be sold as “Units,” with each whole Unit representing $1,000 in principal amount of L Bonds.

L Bonds were likely not suitable for investors with a low-risk tolerance or investors who had liquidity needs.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may reach the firm by phone toll-free at (646) 330-4624.

In February 2021, Mr. Gentile was criminally charged with securities fraud, wire fraud, and conspiracy in federal court. The criminal complaint alleged that Mr. Gentile, among others, engaged in a scheme to defraud investors by misrepresenting the source of funds used to make monthly distributions to investors and the amount of revenue generated by two of GPB’s investment funds, GPB Holdings, LP, and GPB Automotive Portfolio, LP.

Separately, the SEC has charged Mr. Gentile, GPB Capital, and related entities with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

The SEC’s fraud case has been put on hold pending the outcome of related criminal fraud cases against GPB founder David Gentile and two others.

Despite being accused of running a Ponzi-like scheme when he was running GPB Capital, Mr. Gentile filed a legal action in Delaware Chancery Court to compel GPB Capital to pay over $755,000 that he owes to lawyers who are defending him in the criminal and civil actions. The legal fees and expenses are for work already performed by Mr. Gentile’s lawyers. They do not include future legal expenses that Mr. Gentile will incur to defend himself in the impending criminal trial and numerous civil litigations.

Separately, Mr. Gentile is asking for court-supervised mediation to obtain a distribution of more than $5 million to cover his personal tax liability from last year.

Meanwhile, limited partners of GPB Capital private placement funds, such as GPB Automotive Portfolio LP, have not received distributions since 2018. Worse, their investments remain illiquid, as there is no secondary market to sell their units.

In light of the recent news, the future of GPB Automotive Portfolio, LP remains uncertain. Investors of GPB Automotive Portfolio LP are encouraged to act now and contact our securities arbitration law firm for a free consultation and review of their legal rights.

See Also: GPB Investors Have Won Monetary Awards in 10 of 11 Arbitration Cases This Past Year

What can GPB Automotive investors do?

Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.

GPB Capital, an alternative asset management firm, sold unregistered and high commission limited partnership interests through independent broker-dealers and investment advisers who would, in turn, sell the GPB Funds to their retail investors. There are serious concerns that broker-dealers may have failed to conduct reasonable due diligence about the GPB Funds and GPB Capital.

Investors who purchased any of the following private placement investments issued by GPB Capital should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

Investors who have purchased limited partnership units in these illiquid funds through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

If you lost money in the GPB funds, you might have a claim.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.

The judgments and awards come after years of filing lawsuits and arbitration claims by GPB Capital investors.

For our latest posts related to GPB Capital, please click here.

Earlier this year, the SEC has charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

GPB Capital had four flagship funds, which were sold as private placement offerings:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

GPB Capital, an alternative asset management firm, sold unregistered and high commission limited partnership interests through independent broker-dealers and investment advisers who would, in turn, sell the GPB Funds to their retail investors. There are serious concerns that broker-dealers may have failed to conduct reasonable due diligence about the GPB Funds and GPB Capital.

Brokers and brokerage firms are obligated to make suitable recommendations in their customers’ best interests. Among other things, the broker must have a reasonable basis to believe that a recommendation is suitable for a customer based on the particular customer’s investment profile. In addition, the broker and firm must have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. FINRA has stated that “reasonable diligence” means that the firm’s and/or broker’s due diligence “must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.”

Brokerage firms may have failed to conduct reasonable diligence into the GPB funds before selling the private placement offerings to their customers. The firms’ compliance departments likely ignored or missed many red flags such as inflated revenue reports, fabricated profits, kickbacks, and investor funds being funneled into the pockets of GPB’s principals.

Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.

Investors that have purchased any of the following private placement investments issued by GPB Capital should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

If you lost money in the GPB funds, you might have a claim.

A Year of Awards for GPB Capital Investors

Below is a summary of cases that have been identified from publicly available records where investors filed securities arbitration claims seeking to recover investment losses due to, in part, private placement offerings of GPB Capital. The list includes only cases that have proceeded to a hearing. It does not include numerous cases that were settled.

How to Recover GBP Investment Losses

GPB Capital investors should immediately contact a securities arbitration law firm to review their legal rights.

Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

Iorio Altamirano LLP is a national securities arbitration law firm based in New York, NY. The law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf to recover your losses. We generally represent clients on a contingency fee basis. If we do not obtain a recovery, you do not owe us a legal fee.

Submit a form here to schedule a free and confidential consultation.

Iorio Altamirano LLP is investigating claims on behalf of GPB investors who purchased the security through a broker-dealer or registered investment advisor, including, but not limited to the following firms:

• Aegis Capital Corp.
• Aeon Capital Inc.
• American Capital Partners
• Arkadios Capital
• Ausdal Financial Partners, Inc.
• Avere Financial Group, LLC
• Axiom Capital Management, Inc
• BCG Securities, Inc.
• Cabot Lodge Securities LLC
• Calton & Associates, Inc.
• Capital Financial Services, Inc
• Capital Investment Group, Inc.
• Cascade Financial Management, Inc.
• Crystal Bay Securities, Inc.
• David A. Noyes & Company
• Dempsey Lord Smith, LLC
• Detalus Securities, LLC
• DFPG Investments, Inc.
• DH Hill Securities, LLLP
• Dinosaur Financial Group, L.L.C.
• Geneos Wealth Management, Inc.
• Emerson Equity LLC
• Financial West Group
• Great Point Capital LLC
• HighTower Securities, LLC
• IBN Financial Services, Inc.
• Innovation Partners, LLC
• International Assets Advisory, LLC
• Investment Architects, Inc.
• Kalos Capital, Inc.
• Kingsbury Capital, Inc.
• Landolt Securities, Inc.
• Lion Street Financial, LLC
• Lowell & Company, Inc.
• McDonald Partners LLC
• MML Investor Services
• Moloney Securities Co., Inc.
• Money Concepts Capital Corp
• MSC – BD, LLC
• National Securities Corporation
• Newbridge Securities Corporation
• Orchard Securities, LLC
• Pariter Securities, LLC
• Private Client Services, LLC
• Purshe Kaplan Sterling Investments
• Royal Alliance Associates, Inc.
• SagePoint Financial, Inc.
• Sandlapper Securities, LLC
• Silber Bennett Financial, Inc.
• Stephen A. Kohn & Associates, Ltd.
• Uhlmann Price Securities, LLC
• United Planners Financial Services
• Vanderbilt Securities, LLC
• Vestech Securities, Inc.
• Western International Securities, Inc.
• WestPark Capital, Inc.
• Whitehall-Parker Securities, Inc.
• Wilmington Capital Securities, LLC
• Woodbury Financial Services, Inc.

With the recent announcement that GPB Automotive Portfolio, LP agreed to sell Prime Automotive for $880 million, limited partners have been wondering what that means for them.

Below, we delve into GPB Automotive LP’s latest quarterly filing with the SEC to look for answers.

GPB Automotive Portfolio, LP’s 10-Q Filing (9/30/2021)

On November 15, 2021, GPB Automotive Portfolio, LP filed its Form 10-Q with the SEC for the third quarter of 2021, ending on September 30, 2021.

The Sale of Prime Automotive and Unwinding Its Business:

• On September 12, 2021, GPB Automotive agreed to sell Prime Automotive to Group 1 Automotive, Inc. for $880 million.
• The deal includes the sale of GPB Automotive’s remaining 30 car dealerships and three collision centers located in the Northeast of the United States.
• The sale’s closing is expected to be substantially completed by the end of 2021, subject to various closing conditions and the approval of the court-appointed monitor overseeing GPB.
• Once the sale is complete, GPB Automotive will no longer own any car dealerships.
• According to a press release issued by Group 1 Automotive, Inc., the Prime Automotive dealerships generated $1.8 billion in annual revenues in 2020.
• Growth through acquisitions had been a key component of GPB Automotive’s long-term strategy. For the three and nine months ended September 30, 2021, GPB Automotive did not acquire any dealerships.
• For the three months ended September 30, 2021, and 2020, GPB Automotive generated revenues of $519.8 million and $713.5 million, respectively. This represents a decrease of $193.7 million, or 27.1%, in total revenues across all revenue streams. The decrease in total revenue across all revenue streams was primarily attributed to GPB Automotive’s disposition of three of its dealership groups, FX Caprara, Ron Carter, and KRAG, in September and October 2020, which accounted for revenue reductions of $36.5 million, $48.8 million, and $65.3 million, respectively totaling $150.6 million. In addition, there was a $42.4 million decrease revenue attributed to GPB Automotive’s existing dealerships, as a result of lower vehicle inventory related to the COVID-19 pandemic supply chain shortages.

Raising Capital, Debt, and Legal Expense Reserves:

• In 2018, GPB Automotive primarily relied on raising capital from Limited Partners in the amounts of $185.4 million. Capital raising activities were suspended in June 2018.
• After that, GPB Automotive relied primarily on cash on hand, cash flows from operations, floorplan lines of credit, and borrowings under its credit facilities as the main sources for liquidity.
• As of September 30, 2021, the maximum financing available under GPB Automotive’s financing agreements (for new vehicles and used vehicles combined) was $206.9 million.
• As of September 30, 2021, GPB Automotive had total liabilities of $461 million.
• In addition, GPB Automotive had an undisclosed amount of money set aside for the costs of the numerous legal actions (consisting of an SEC civil matter, a federal criminal case against GPB’s founder and other former principals, two state-initiated matters, and at least 20 other civil legal actions).
• With respect to all significant litigation and regulatory matters facing GPB Automotive, its general partner, and its dealerships, GPB Automotive has considered the likelihood of an adverse outcome. It is possible that GPB Automotive could incur losses pertaining to these matters that may have a material adverse effect on its operational results, financial condition, or liquidity in any future reporting period. The general partner is currently paying legal costs associated with these actions for itself and certain indemnified parties. GPB Automotive expects to provide partial reimbursement to the General Partner as required by various agreements or governing law, but the amount is not reasonably estimable at this time.
• If the legal expense reserves are insufficient to cover the actual costs of the extensive legal actions, GPB Automotive may seek to recoup distributions that have already been paid to investors.
• For the nine months ended September 30, 2021, GPB Automotive recorded $3.7 million of legal indemnification expenses.
• GPB agreed to pay former Prime Automotive majority owner David Rosenberg $30 million to settle litigation and arbitration claims. The original lawsuit was filed in July 2019, when Mr. Rosenberg and Rosenberg family trusts filed a lawsuit in Massachusetts Superior Court against GPB, alleging that GPB retaliated against Mr. Rosenberg after he tried to address alleged fraudulent activity at GPB.

Restrictions on GPB Automotive’s Ability to Pay Distributions to Investors:

• The aforementioned financing agreements include covenants that limit GPB Automotive’s ability to make certain payments, including distributions to shareholders.
• Additionally, GPB Automotive disclosed to investors that it might delay or withhold distributions until legal reserves are no longer needed or the escrow period expires.

The Impact of the Sale of Prime Automotive

The sale of Prime Automotive will generate $880 million in cash for GPB Automotive. At first blush, that would seem to be a positive development for limited partnership investors. However, a closer look reveals that the forecast remains foggy for limited partners of GPB Automotive.

For starters, when GPB Automotive agreed to sell Prime Automotive, it also agreed to sell its primary revenue stream. According to reports, the Prime Automotive dealerships generated $1.8 billion in annual revenues in 2020.

Owning and operating retail automotive dealerships was GPB Automotive’s primary business model. A key component of its long-term strategy was to grow through acquisitions. Over the past nine months, GPB Automotive has been selling its dealerships instead of acquiring new car dealerships. Once the Prime Automotive sale is complete, likely before the end of the year, GPB Automotive will no longer own any car dealerships. GPB Automotive appears to be unwinding its business.

As of September 30, 2021, GPB Automotive had total liabilities of $461 million. If the business is indeed unwinding, the sale proceeds from the Prime Automotive deal would likely be used to pay off the partnership’s financial obligations.

The use of the remaining proceeds, including whether investors would receive back a portion of their principal investments, remains unclear. We know that the partnership is subject to significant litigation and regulatory matters and must pay a portion of the legal expenses for these proceedings. As disclosed in the latest SEC filing, GPB Automotive have considered the likelihood of an adverse outcome and has considered the possibility that GPB Automotive could incur losses pertaining to these matters that may have a material adverse effect on its operational results, financial condition, or liquidity in any future reporting period.

With potentially years of litigation ahead, GPB Automotive investors may be discouraged. However, they are not without options.

What Can GPB Automotive Investors Do?

GPB Automotive investors should immediately contact a securities arbitration law firm to review their legal rights.

Investors who have purchased GPB Automotive through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

For example, in August 2021, a FINRA arbitration panel in New York, New York, ruled in favor of a brokerage customer that invested in GPB Automotive Portfolio LP and GPB Waste Management LP at the recommendation of his financial advisor at Hightower Securities, LLC.

The arbitration panel ordered Hightower Securities, LLC to refund $163,201 to the customer in exchange for returning the limited partnership interests, essentially making the customer whole. The customer had purchased the limited partnership interests for $170,000 and had previously received $6,799 from the investments as a return of capital.

Brokers and brokerage firms are obligated to make suitable recommendations in their customers’ best interests. Among other things, the broker must have a reasonable basis to believe that a recommendation is suitable for a customer based on the particular customer’s investment profile. In addition, the broker and firm must have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. FINRA has stated that “reasonable diligence” means that the firm’s and/or broker’s due diligence “must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.”

Brokerage firms may have failed to conduct reasonable diligence into the GPB funds before selling the private placement offerings to their customers. The firms’ compliance departments likely ignored or missed many red flags such as inflated revenue reports, fabricated profits, kickbacks, and investor funds being funneled into the pockets of GPB’s principals.

Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.

Investors that have purchased any of the following private placement investments issued by GPB Capital should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

If you lost money in the GPB funds, you might have a claim.

How to Recover GBP Investment Losses

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.

The claim, which Iorio Altamirano LLP filed on behalf of an investor in the GPB Automotive Portfolio, LP fund, seeks to recover investment losses as a result of the investment advisor’s recommendation to invest in GPB Capital.

GPB Capital sold unregistered and high commission limited partnership interests in a total of eight alternative-asset investment funds. The GPB Funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB Funds to their retail investors. There are serious concerns that broker-dealers may have failed to conduct reasonable due diligence about the GPB Funds and GPB Capital.

Iorio Altamirano LLP is a securities arbitration law firm that is actively representing investors in the GPB Funds, including GPB Automotive Portfolio, LP.

GPB Automotive Portfolio, LP and the GPB Funds

GPB Capital had four flagship funds, which were sold as private placement offerings. GPB Automotive Portfolio, LP was one of the four offerings.

GPB Automotive’s regulatory filings from May 2021 disclosed that there was substantial doubt that the business would survive.

In July 2021, GPB Automotive disclosed that it was able to obtain a financing agreement with M&T Bank but that it only had sufficient liquidity to meet its financial obligations through July 21, 2022.

In September 2021, according to SEC filings, GPB Automotive Portfolio LP entered into an agreement to sell Prime Automotive for $880 million, consisting of 30 car dealerships and three collision centers located in the Northeast of the United States. Once the sale is complete, GPB Automotive Portfolio will own no car dealerships outright.

In light of the recent news, the future of GPB Automotive Portfolio, LP remains uncertain. Investors of GPB Automotive Portfolio LP are encouraged to act now and contact our securities arbitration law firm for a free consultation and review of their legal rights.

Investors who purchased any of the following private placement investments issued by GPB Capital should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

The SEC has charged GPB Capital and related entities, Ascendant Capital and Ascendant Alternative Strategies, with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

How to Recover GBP Investment Losses

GPB Automotive investors should immediately contact a securities arbitration law firm to review their legal rights.

Investors who have purchased GPB Automotive, GPB Holdings, GPB Holdings II, or GPB Waste Management through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

For example, in August 2021, a FINRA arbitration panel in New York, New York, ruled in favor of a brokerage customer that invested in GPB Automotive Portfolio LP and GPB Waste Management LP at the recommendation of his financial advisor at Hightower Securities, LLC.

The arbitration panel ordered Hightower Securities, LLC to refund $163,201 to the customer in exchange for returning the limited partnership interests, essentially making the customer whole. The customer had purchased the limited partnership interests for $170,000 and had previously received $6,799 from the investments as a return of capital.

Brokers and brokerage firms, such as Aegis Capital Corp, are obligated to make suitable recommendations in their customers’ best interests. Among other things, the broker must have a reasonable basis to believe that a recommendation is suitable for a customer based on the particular customer’s investment profile. In addition, the broker and firm must have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. FINRA has stated that “reasonable diligence” means that the firm’s and/or broker’s due diligence “must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.”

Brokerage firms may have failed to conduct reasonable diligence into the GPB funds before selling the private placement offerings to their customers. The firms’ compliance departments likely ignored or missed many red flags such as inflated revenue reports, fabricated profits, kickbacks, and investor funds being funneled into the pockets of GPB’s principals.

If you were an investor in the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a national securities arbitration law firm based in New York, NY. The law firm pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf to recover your losses. We generally represent clients on a contingency fee basis. If we do not obtain a recovery, you do not owe us a legal fee.

Additionally, the FINRA AWC alleged from July 2014 to June 2019, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 when selling leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (Non-Traditional ETFs) to retail customers. As a result, Aegis Capital failed to identify customers who purchased and held Non-Traditional ETFs for extended periods of time or whose purchase was inconsistent with their recorded investment objective, risk tolerance, or finances.

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Aegis Capital Corp.

FINRA Letter of Acceptance, Waiver, and Consent No. 201605174305

FINRA and Aegis Capital entered into a Letter of Acceptance, Waiver, and Consent No. 201605174305on November 8, 2021, after FINRA alleged that between July 2014 through December 2018, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as it pertains to excessive trading.

Excessive Trading

Specifically, with regard to excessive trading, FINRA alleged the following:

• Between 2014 and 2018, Aegis Capital employed on average more than 350 registered representatives across more than 20 branch offices, with the majority working in the firm’s Melville, 40 Wall Street, and Seventh Avenue branches.
• More than 10% of the firm’s registered representatives disclosed personal financial issues, such as outstanding liens, judgments, or bankruptcies on FINRA’s Central Registration Depository.
• During the relevant period, Aegis Capital used boilerplate WSPs prepared by an outside vendor for supervision of registered representatives’ trading in customer accounts.
• Aegis Capital’s WSPs instructed its branch managers to monitor trading for suitability issues during their daily review of Aegis Capital’s trade blotters but did not explain how the firm’s supervisors should conduct the daily trade review or use the trade blotters and other available customer information to identify potentially unsuitable or excessive trading in Aegis Capital’s customers’ accounts.
• The WSPs also did not define or require supervisors to calculate or consider, turnover rate, or cost-to-equity ratio.
• Additionally, Aegis Capital did not provide its branch and assistant branch managers training to compensate for the lack of guidance in the WSPs.
• Aegis Capital’s trade blotters were not designed to flag excessive trading activity, as they did not show the trading history in an account or the holding period between buys and sells in the same security. The blotters also did not include cost-to-equity or turnover, or information regarding the use of margin, even though many of the firm’s registered representatives recommended the use of margin to their customers.
• Aegis Capital’s WSPs also required branch managers to conduct monthly and semi-annual reviews of customer account activity to monitor for suitability and churning, and the firm’s chief compliance officer or their designee to review “active accounts” (defined as accounts with more than 20 transactions per month and $5,000 in commissions), to determine if the type, size, and frequency of trades were consistent with the customer’s investment objectives. However, these reviews were not performed for most of the relevant period.
• Aegis Capital had access to additional supervisory tools to monitor and identify excessive trading. Aegis Capital received exception reports from its clearing firm specifically designed to identify accounts with turnover rates and commission-to-equity ratios indicative of excessive and unsuitable trading. The exception reports were triggered when the annualized cost-to-equity ratio in accounts with an aggressive or speculative investment objective exceeded 5% or 6%, respectively, for three or more consecutive days, or the turnover exceeded 500% for five or more consecutive days.
• From July 2014 to December 2018, the active, in-and-out trading conducted by Aegis Capital’s registered representatives generated thousands of exception reports identifying customer accounts with potentially unsuitable turnover rates and commission-to-equity ratios. Approximately one-third of the exception reports related to trading in accounts held by senior investors, and more than 900 identified potentially unsuitable trading by eight registered representatives who worked in Aegis Capital’s Melville and Wall Street branches (the Representatives).
• These exception reports were active and viewable in the trade review system that Aegis Capital’s supervisors used to conduct their daily trade reviews. However, for most of the relevant period, Aegis Capital’s WSPs did not reference the exception reports or require its supervisors to review and address them.
• Aegis Capital also received more than 50 complaints from customers alleging excessive, unsuitable, or unauthorized trading in their firm accounts, including at least 13 complaints from customers whose accounts were managed by the Representatives.
• Aegis Capital failed to take reasonable steps to investigate these numerous red flags of potentially excessive and unsuitable trading by its registered representatives. Instead, Aegis Capital and its supervisors sent disclosure letters designed to document a customer’s general acknowledgement of the trading in their accounts and the trading costs they incurred. However, the letters did not include the actual costs of the trading, the costs incurred due to the use of margin, or explain what trades (or series of trades) prompted Aegis to issue the letter.
• During the relevant period, Aegis Capital’s compliance department prepared reports documenting the “key compliance issues” identified during its review and testing of Aegis Capital’s supervisory systems, procedures, and controls. Aegis Capital’s annual testing reported that:
• Aegis Capital lacked specific procedures to monitor turnover and commission-to-equity ratios in customers’ accounts.
• Aegis Capital should use exception reports that monitor commission activity and trading velocity (or turnover) to ensure “adequate” commission-to-equity ratios in its customers’ accounts.
• Aegis Capital was not utilizing specific alerts provided by its clearing firm that would ensure adequate commission-to-equity ratios.
• Aegis Capital’s WSPs did not identify which clearing firm exception reports that it would use to conduct supervisory trading reviews or the principals responsible for reviewing them.
• Aegis Capital needed additional compliance personnel to keep pace with Aegis Capital’s rapid hiring and growth.
• Although many of these findings carried over from year-to-year, Aegis Capital did not immediately address the deficiencies identified by its annual testing. Aegis Capital did not supplement its daily trade reviews with systems, surveillance, or reviews specifically designed to monitor or calculate commission-to-equity ratios or turnover rates in customer accounts or require its supervisors to review the exception reports provided by its clearing firm. Aegis Capital also did not update the daily trade blotters to include information that would enable its supervisors to identify patterns of trading, commissions, or accumulated losses in customer accounts.
• In 2018, Aegis Capital retained a third-party vendor to provide new automated trade surveillance and alerts. In 2019 and again in 2020, Aegis Capital also retained independent consultants to conduct comprehensive reviews of its WSPs and supervisory controls, and its remediation is ongoing.
• Even so, during the Relevant Period, Aegis Capital failed to identify potentially excessive and unsuitable trading in hundreds of customer accounts. Aegis Capital’s unreasonable supervisory system, combined with the failure to respond to the red flags discussed above, also allowed the Representatives to make unsuitable recommendations and excessively trade the accounts of 31 customers. The trading by the Representatives in the accounts of those 31 customers resulted in annualized turnover rates ranging from 4.2 to 199.8 and cost-to-equity ratios ranging from 21.2% to 164.6%, and more than $2.9 million in costs and $4.6 million in losses.
• Accordingly, Aegis Capital violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had a turnover rate between 4.2 and 199.8.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 21.2% and 164.6%.

The practice of excessively trading customers’ accounts is unethical and illegal. Such conduct is also a violation of securities rules and regulations and can cause enormous harm to customers.

Non-Traditional ETFs

The FINRA AWC also alleged from July 2014 to June 2019, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 when selling leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (Non-Traditional ETFs) to retail customers.

Specifically, with regard to Non-Traditional ETFs, FINRA alleged the following:

• Exchange-Traded Funds (ETFs) are typically registered unit investment trusts or open-end investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index. Shares of ETFs often are listed on national securities exchanges and traded throughout the day at prices established by the market.
• Leveraged ETFs seek to return a multiple of the performance of the index or benchmark they track. Some Non-Traditional ETFs are “inverse” or “short” funds, meaning they seek to deliver the opposite of the performance of the index or benchmark they track. Some funds are both inverse and leveraged, meaning that they seek to achieve a return that is a multiple of the inverse performance of the underlying index or benchmark. Most Non-Traditional ETFs reset daily, meaning they are designed to achieve their stated objectives only over the course of one trading session – usually a single day.
• In June 2009, FINRA issued Regulatory Notice 09-31. Regulatory Notice 09-31 reminded member firms that the performance of Non-Traditional ETFs over periods of time longer than a single trading session “can differ significantly from the performance … of their underlying index or benchmark during the same period of time.” Because of these risks and the complexity of these products, the notice further advised that “[w]hile the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”
• In January 2012, FINRA issued Regulatory Notice 12-03. Regulatory Notice 12-03 reminded member firms that Non-Traditional ETFs that reset daily are complex products that require heightened supervision. The notice explained that member firms should have: (i) a well-designed system of internal controls; (ii) adequate training, so its registered representatives understand how Non-Traditional ETFs are expected to perform in normal market conditions and the risks associated with them; and (iii) monitoring systems or procedures reasonably designed to determine that Non-Traditional ETFs are recommended and sold only to customers who understand their essential features and for whom the product is suitable.
• From July 1, 2014, to June 1, 2019, Aegis Capital’s registered representatives executed more than 3,000 transactions, with a total principal value of more than $400 million, in Non-Traditional ETFs that reset daily. The transactions were executed in 524 retail customer accounts and generated approximately $422,000 in sales compensation for Aegis Capital and its registered representatives.
• Consistent with Regulatory Notice 12-03, Aegis Capital’s WSPs designated Non-Traditional ETFs as a complex product requiring heightened supervision. For example, Aegis Capital’s WSPs required the firm to provide its registered representatives with mandatory training on the features and risks of Non-Traditional ETFs and clear instructions regarding the types of customers for whom Non-Traditional ETFs were suitable. Aegis Capital’s WSPs also required the firm to appoint a product manager responsible for determining the type of investor for whom the purchase or sale of Non-Traditional ETFs was suitable and tasked the firm’s branch managers with reviewing each Non-Traditional ETF transaction for customer-specific suitability.
• Aegis Capital failed to conduct the heightened supervision its WSPs required. Aegis Capital did not designate an individual to act as the product manager or require its branch managers to perform the heightened suitability review its WSPs mandated for sales of Non-Traditional ETFs. Aegis Capital did not provide its registered representatives with any training on Non-Traditional ETFs until November 2018 or establish guidance regarding the types of customers for whom the purchase of Non-Traditional ETFs was suitable until June 2019.
• Aegis Capital’s supervisory systems were also not reasonably designed to detect potentially unsuitable transactions involving Non-Traditional ETFs. As discussed in Regulatory Notice 09-31, a primary risk associated with Non-Traditional ETFs is that their performance over longer periods of time can differ significantly from the performance of their underlying index or benchmark, particularly in volatile markets. Aegis Capital relied on its daily trade review to monitor how long customers who purchased Non-Traditional ETFs held the security before selling it. However, the trade blotter did not include information that allowed the branch managers to identify whether a customer held a Non-Traditional ETF for more than one day, and Aegis Capital did not track the holding periods of Non-Traditional ETF positions.
• As a result, Aegis Capital failed to identify customers who purchased and held Non-Traditional ETFs for extended periods of time up to and including a year or longer and customers whose purchase was inconsistent with their recorded investment objective, risk tolerance, or finances. Fifteen of those customers – including seniors and individuals with conservative or moderate risk tolerances – incurred total realized losses of $132,463.
• Accordingly, Aegis Capital violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

Sanctions

Aegis Capital consented to the imposition of the following sanctions: a censure, a fine of $1,050,000, and restitution of $1,692,256.44.

Aegis Capital Corp: 2021 Disciplinary Actions

This blog has repeatedly written about Aegis Capital and its brokers’ propensity to engage in excessive and unsuitable trading in customers’ accounts.

The following chart summaries disciplinary actions that have been taken against Aegis Capital and its brokers in 2021 and also includes links to previous blog posts:

Unfortunately, Aegis Capital’s misconduct is not new. Aegis Capital Corp has a long history of allegations of wrongdoing.

In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure reports.

The alleged conduct by the brokers that have been sanctioned this year, such as excessive trading, churning, and unauthorized trading, are common practices for “boiler room” broker-dealers.

Aegis Capital Corp. – A Duty to Supervise

Financial institutions like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as annuity switches, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Iorio Altamirano LLP Investigates Aegis Capital Over GPB Funds

According to publicly available records filed with the SEC, Aegis Capital likely received sales compensation for selling the private offerings by GPB Capital to retail investors.

Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.

If you lost money investing in private offerings by GPB Capital with Aegis Capital Corp, including GPB Automotive, you might have a claim.

The SEC has charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

Nearly $1.7 billion of that total was invested in GPB Capital’s four flagship funds:

• GPB Holdings, LP / GPB Holdings Qualified, LP (“Holdings Qualified”) (collectively, “Holdings I”), launched in March 2013;
• GPB Automotive Portfolio, LP (“Automotive Portfolio”), launched in May 2013;
• GPB Holdings II, LP (“Holdings II”), launched in April 2015; and
• GPB Waste Management, LP (“Waste Management”), launched in August 2016.

See Also: Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

If you invested in the GPB funds with Aegis Capital, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account. We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

Related actions have also been initiated all over the country. The New York State Attorney General filed a complaint against GPB Capital. According to the complaint, as of June 2019, GPB Capital estimated the fair market value of its funds’ portfolio assets at approximately $1 billion – representing a more than 40% loss on investors’ initial capital contributions. The exact portfolio asset values are unknown, as the funds have not issued audited financials since 2016.

In addition to the State of New York, Massachusetts, Georgia, Illinois, Missouri, South Carolina, and Alabama have initiated similar legal proceedings.

You can read more about our firm’s investigation into the GPB funds and the SEC action here.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Aegis Capital Corp. or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

The future of GPB Automotive Portfolio, LP remains uncertain. Investors of GPB Automotive Portfolio LP are encouraged to act now and contact a securities arbitration law firm for a free consultation and review of their legal rights.

Iorio Altamirano LP is a securities arbitration law firm that represents GPB Automotive investors.

As we wrote about last month, the sale of GPB Automotive Portfolio’s largest dealership group, Prime Automotive, has continued to raise speculation that GPB Automotive was running out of cash. According to regulatory filings from earlier this year, GPB Automotive disclosed that it might sell dealerships to provide operational liquidity.

On December 31, 2018, GPB Automotive’ s portfolio consisted of 52 dealerships and 81 franchises. By March 31, 2021, the GPB Automotive portfolio fell to 32 dealerships and 45 franchises. Now, with the announced sale of 30 dealerships to Group 1 Automotive, Inc., along with the sale of two dealerships in April 2021, GPB Automotive Portfolio currently owns no car dealerships.

The latest news follows GPB Automotive’s regulatory filings in May 2021 that disclosed that there was substantial doubt that the business would survive, and July 2021 that disclosed that the Partnership was able to obtain a financing agreement with M&T Bank, but that the Partnership only had sufficient liquidity to meet its financial obligations through July 21, 2022.

The forecast remains foggy for limited partners of GPB Automotive, who have endured years of bad news:

• 2018: GPB Automotive Portfolio, LP stopped paying distributions to limited partners, and regulators launched investigations against the general partner, GPB Capital Holdings, LLC.
• June 2019: GPB Automotive reported significant losses.
• July 2019: David Rosenberg, a principal of Prime Automotive Group in Massachusetts, which GPB Automotive purchased, accused GPB Capital of running a “Ponzi-like” scheme.
• June 2020: The State of Massachusetts filed a fraud complaint against GPB Capital Holdings.
• February 2021: The SEC charged parent company GPB Capital and three individuals with running a Ponzi-like scheme that raised over $1.7 billion from securities issued by GPB Capital in four of its funds, including GPB Automotive. The SEC’s fraud case has been put on hold pending the outcome of related criminal fraud cases against GPB founder David Gentile and two others.

The cost for much of the legal defense is being paid for by Partnership, a punch in the gut to limited partners who have money tied up in the illiquid Partnership but have not received any distributions for three years. According to public filings, if the legal reserves are insufficient to cover the actual costs of the extensive legal actions, GPB Automotive may seek to recoup distributions that have already been paid to investors.

Although GPB Automotive investors may be discouraged, they are not without options.

What can GPB Automotive investors do?

GPB Automotive investors should immediately contact a securities arbitration law firm to review their legal rights.

Investors who have purchased GPB Automotive through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.

For example, last month, a FINRA arbitration panel in New York, New York, ruled in favor of a brokerage customer that invested in GPB Automotive Portfolio LP and GPB Waste Management LP at the recommendation of his financial advisor at Hightower Securities, LLC.

The arbitration panel ordered Hightower Securities, LLC to refund $163,201 to the customer in exchange for returning the limited partnership interests, essentially making the customer whole. The customer had purchased the limited partnership interests for $170,000 and had previously received $6,799 from the investments as a return of capital.

Brokers and brokerage firms are obligated to make suitable recommendations in their customers’ best interests. Among other things, the broker must have a reasonable basis to believe that a recommendation is suitable for a customer based on the particular customer’s investment profile. In addition, the broker and firm must have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. FINRA has stated that “reasonable diligence” means that the firm’s and/or broker’s due diligence “must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.”

Brokerage firms may have failed to conduct reasonable diligence into the GPB funds before selling the private placement offerings to their customers. The firms’ compliance departments likely ignored or missed many red flags such as inflated revenue reports, fabricated profits, kickbacks, and investor funds being funneled into the pockets of GPB’s principals.

Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.

Investors that have purchased any of the following private placement investments issued by GPB Capital should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights:

• GPB Holdings, LP / GPB Holdings Qualified, LP.
• GPB Automotive Portfolio, LP.
• GPB Holdings II, LP.
• GPB Waste Management, LP.

If you lost money in the GPB funds, you might have a claim.

How to Recover GBP Investment Losses

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.