The investors were told their 8% monthly distributions would be fully covered by profits of the portfolio’s companies, despite the executives knowing about its shortfalls. But in reality, the investors were at least partially paid with funds from new investors.
The defendants allegedly falsified financial statements and created back-dated performance guarantees to show an income that did not exist.
GPB claims it has acted in good faith while managing investors’ funds.
“GPB denies these allegations and intends to vigorously defend itself in court where, for the first time, the firm will be able to present significant evidence in its favor,” the company said in a statement to CNN Business.
New York state also filed a lawsuit against GPB on Thursday.
“We won’t let Wall Street fat cats get away with breaking the rules, as they pilfer New Yorker’s wallets in the meantime,” James said in a statement.
The complaint also charged the defendants with misappropriating funds. Investor funds were spent on subsidizing private planes, luxury travel and millions of dollars funneled into personal and family bank accounts, New York AG alleges. The lawsuit alleges Gentile even bought a Ferrari with investor funds.
Along with the Office for the Eastern District of New York and SEC, numerous states from Alabama to New Jersey also filed their own lawsuits against GPB Capital.