A Manhasset man was found guilty in a $1 billion fraud scheme in federal court in Brooklyn after an eight-week trial on a years-long maneuver that conned more than 10,000 investors, according to the Eastern District of New York U.S. Attorney’s office.
David Gentile, 57, is a Manhasset resident and the founder, owner and chief executive officer of GPB Capital Holdings. He was convicted alongside Texas resident Jeffry Schneider, 55, the owner and CEO of Ascendant Capital LLC, for their joint scam.
“The jury found that the defendants lied to investors about the health of their funds and the source of fund distribution payments, all while they were fraudulently making those distribution payments with investor capital to maintain the appearance of successful portfolio companies,” U.S. Attorney Breon Peace said in a statement. “This office has a proud history of prosecuting fraudsters who abuse the trust of investors, and we will continue to vigorously protect the integrity of the financial markets.”
The pair were convicted Aug. 1 of all charges brought against them. This included conspiracy to commit securities fraud, conspiracy to commit wire fraud and securities fraud. Gentile was convicted on two additional counts of wire fraud.
Both face upwards of 20 years in prison.
Gentile and Schneider defrauded the 10,000 victims by misrepresenting fund sources to make monthly distribution payments, according to the U.S. Attorney’s Office. The duo also misrepresented revenue amounts from GPB’s three investment funds.
GPB, a New York-based investment advisor registered with the SEC, was founded by Gentile in 2013. GPB partnered with Ascendant Capital, a marketing firm founded by Schneider, for dealing with investors.
The U.S. Attorney’s office said the two worked closely together in this scheme, which lasted from August 2015 through December 2018.
“Specifically, Gentile and Schneider, both individually and through employees at Ascendant Capital, represented to investors that the funds would make a monthly distribution payment that would be fully covered from operations, meaning that the companies purchased by the funds would be sufficiently profitable for the payments to be made from the companies’ cash flow, without drawing from capital raised by investors,” the U.S. Attorney’s Office said.
But shortfalls occurred, the U.S. Attorney’s Office said, which led to Gentile and Schenider using back-dated documents and paying investor distributions out of investor capital to cover the gap.
Investor capital paid for a “significant portion” of distributions made to investors, the U.S. Attorney’s Office said.
The U.S. Attorney’s Office said both knew that the funds were insufficient but OK’d the fraudulent distribution payments.
