The Boston-based investment firm GPB Capital Holdings recently reported that updated valuations on its various investments dropped further than expected. In addition, the company has missed several filing deadlines and is being accused of operating a Ponzi-like scheme in various pending litigation matters. As such, many investors are wondering whether their GPB investments are worth the value that was originally reported by the company.
According to court documents, GPB Capital raised money from investors by selling private placements through brokerage firms. These investments were intended to be used to purchase auto dealerships and waste management companies with the goal of generating high single-digit returns for investors. These types of investments are typically sold to high-net-worth and accredited investors because they involve a significant amount of risk.
Investors who were sold Advice on GPB Capital private placements have suffered substantial losses. In some cases, these investments have declined in value by more than 70% of their initial investment. The Securities and Exchange Commission (SEC) and the Massachusetts Securities Division have begun investigating 63 brokerage firms that sold these investments.
Many of these firms had incentive to push these high-commission alternative investments on their clients because they often generated commissions as high as 9.3%. Investors who suffer significant losses in these investments may be able to recover their loss through a claim filed with the SEC or FINRA customer arbitration.
Some of these claims against brokerage firms are based on allegations that the firm failed to conduct adequate due diligence before offering the GPB private placements to its clients. This is important because investors should be able to trust that the broker or financial advisor they are working with will perform a thorough investigation of any potential investment before recommending it to their clients. Inappropriate or negligent advice in this area can lead to significant harm for investors, including lost investments, fees and penalties.
One example of this type of claim involves an elderly retiree couple who were recommended GPB Capital investments by a broker registered with International Assets Advisory and another firm named Money Concepts. The couple attended seminars hosted by these firms and made six-figure investments in the GPB Automotive Portfolio fund and GPB Arvada Waste Management Fund, among others.
Upon investing, the couple was told by the brokers that their distributions would be paid out of profits from the business investments. However, as recent reports have indicated, these distributions have been coming directly out of the investment funds rather than from the underlying business operations. As a result, some investors are now receiving significantly lower distributions than they were promised and could face significant tax consequences.
Investors who invested in GPB Capital should review their consolidated tax statements and speak with an experienced attorney about possible options for recovery. It is important to act quickly because many brokerage firms have limited resources and insurance coverage for these types of claims. If you are an investor who suffered losses in a GPB Capital private placement, contact our firm to discuss your claim for compensation.