Dimond Kaplan & Rothstein, P.A. is pleased to share that it has secured a FINRA arbitration award for its clients’ investment losses. DKR’s clients lost money in GPB Automotive Portfolio, LP (“GPB”), a high-commissions, illiquid, private placement. The SEC and criminal prosecutors have since accused GPB's CEO, David Gentile, and Jeffry Schneider, the owner of GPB's placement agent, Ascendant Capital, with running a $1-billion-plus Ponzi-like scheme. In addition to ordering Arete to compensate Messrs. Barron and Young for their losses, the three FINRA arbitrators also ordered Arete to pay DKR and co-counsel Levin Law more than $250,000 in attorneys’ fees.
Claimants Howard Barron and Howard B. Young filed their FINRA arbitration claim seeking to recover their GPB investment losses from brokerage firm Arete Wealth Management. They argued that Arete had failed to adequately fulfill its due diligence obligations when it approved GPB investments for sale to customers. Among other things, the investors argued that Arete had identified numerous serious red flags about GPB that should have caused Arete to reject GPB for sale to customers. Instead, Arete sold GPB to investors without disclosing the various significant concerns that Arete had identified. Messrs. Barron and Young argued that Arete’s actions violated the Michigan Securities Act.
GPB Capital Holdings Accused of Running Ponzi-Like Scheme to Dupe Investors
The SEC recently charged individuals and affiliated entities associated with GPB with running a Ponzi-like scheme that raised over $1.7 billion from investors. GPB’s CEO also has been indicted for his involvement in the alleged fraud.
The complaint alleges that the owner and CEO of GPB Capital, David Gentile, and the owner of GPB Capital’s placement agent Ascendant Capital, Jeffry Schneider, lied to investors about the source of money used to make an 8% annualized distribution payment to investors. The two, along with Ascendant Alternative Strategies, which marketed GPB Capital’s investments, allegedly told investors that distribution payments were paid from money generated by GPB Capital’s portfolio companies. It is further alleged that the truth was that GPB manipulated its financial statements to make it seem as though it was generating the funds needed for the distribution payments.
DKR Secures Award Inclusive of Fees
It is believed that this is the first FINRA arbitration award for GPB investors against a brokerage firm that is actually still in business and can pay the award. Hundreds of similar FINRA arbitration cases remain pending.
Jeffrey Kaplan, a Dimond Kaplan & Rothstein, P.A. partner who represented the claimants, along with Brian Levin of Levin Law said, “We argued the case as a pure due diligence case — not about customer suitability. No customer, regardless of their net worth or sophistication, should have been sold this product. We believe Arete failed to fulfill its due diligence obligations and we believe that the arbitrators’ award supports our position.”
One significant aspect of the arbitration award is that by ordered Arete to pay the claimants’ attorneys’ fees, the entire compensatory damage award will go to DKR’s clients.
Kaplan was quoted, “This is the rare FINRA arbitration award where arbitrators awarded every single penny requested.” He said, “We believe the reflects that the three arbitrators essentially we're saying, how could the firm ignore all the problems it identified.”
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