Investors were told that their monthly distributions of 8% would be fully covered by the profits of the companies in the portfolio, although executives were aware of their shortcomings. But in reality, investors were, at least in part, paid for with funds from new investors.
Defendants allegedly falsified financial statements and created dated execution guarantees to show income that did not exist.
GPB says it acted in good faith in managing investors’ funds.
“GPB denies these allegations and intends to defend itself vigorously in court where, for the first time, the company 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 the GPB on Thursday.
“We are not going to let fat cats on Wall Street get away with breaking the rules because they steal the New Yorker wallets in the meantime,” James said in a statement.
The complaint also accused the defendants of misappropriating funds. Investor funds were spent on subsidizing private planes, luxury travel and millions of dollars channeled into personal and family bank accounts, claims New York AG. The suit alleges that Gentile even bought a Ferrari with funds from investors.
Along with the New York East District Office and the SEC, several states, from Alabama to New Jersey, have also filed their own lawsuits against GPB Capital.