2017: Photo from Jeffry Schneider’s blog. Names of key GPB officials (current and former) tagged by the Scientology Money Project.

In the media firestorm surrounding the indictment of GPB Capital Chief Compliance Officer Michael Cohn on felony obstruction charges, a new class action lawsuit against GPB Capital was filed on October 25, 2019. A reader kindly informed us of this lawsuit. The complaint was filed in the United States District Court for the Western District of Texas.

Captioned Kinnie Ma Individual Retirement Account , individually and on behalf of all others similarly situated vs. Ascendant Capital LLC, Ascendant Alternative Strategies, GPB Capital Holdings, David Gentile, Jeffry Schneider, Mark Martino, et, al. The complaint names dozens of defendants including GPB’s Broker Dealers.

This 98 page complaint outlines GPB’s alleged scheme by incorporating an incredible amount of detail. The causes of action:

Count I: Violation of the Texas Securities Act, Tex. Rev. Civ. Stat. Ann. art. 581-33 (Against GPB and the GPB Funds)

Count II: Aiding and Abetting Violations of the Texas Securities Act, Tex. Rev. Civ. Stat. Ann. art. 581-33 (Against the Broker Defendants, GPB Defendants (Other Than the Funds), Gentile, Schneider, Martino, Phoenix, RSM, and the Accounting Defendants)

Count III: Control Person Violations of the Texas Securities Act, Tex. Rev. Civ. Stat. Ann. art. 581-33
(Against Gentile, Schneider, Martino, MR Ranger, DJ Partners, Ascendant Capital, Ascendant Strategies, and GPB)

Count IV: Violations of the Texas Securities Act, Tex. Rev. Civ. Stat. Ann. art. 581-7 and 581-33(A)(1)
(Against GPB and the Funds)

Count V: Aiding and Abetting Violations of the Texas Securities Act, Tex. Rev. Civ. Stat. Ann. art. 581-7 and 581-33(A)(1) (Against Broker Defendants, GPB Defendants (Other Than the Funds), Gentile, Schneider, Martino, MR Ranger, DJ Partners, and Fund Administrator)

Count VI: Control Person Violations of the Texas Securities Act, Tex. Rev. Civ. Stat. Ann. art. 581-7 and 581-33(A)(1) (Against Gentile, Schneider, Martino, MR Ranger, DJ Partners, Ascendant Capital and Ascendant, and GPB)

Count VII: Fraud (Against GPB Defendants, Gentile, Schneider, and Martino)

Count VIII: Substantially Assisting in Commission of Fraud (Against the GPB Defendants (Other Than the Funds), Fund Administrator, and Broker Defendants)

Count IX: Breach of Fiduciary Duty (Against GPB Capital and Gentile)

Count X: Not Listed/Numbering Error?

Count XI: Substantially Assisting in the Breach of Fiduciary Duty (Against Fund Administrator, Broker Defendants, GPB Defendants, Schneider and Martino)

Count XII: Negligence (Against Fund Administrator, RSM and Auditor Defendants)

An explosive allegation is that David Gentile and Jeffrey Schneider created a secret co-ownership relationship between GPB Capital and Ascendant Capital:

A. Gentile and Schneider Embark on Their Scheme to Fraudulently Raise Money from Investors Employing a Secret Agreement to Share Profits

87. In or about 2012, Austin, Texas resident Schneider formed Ascendant as a provider of alternative investment solutions. In or about 2013, Schneider approached Gentile with the concept for GPB Capital: “partnering on an income-producing private equity fund.” Creating a Corporate Culture That Gives Back, 30 Founding Austin (Sept. 19, 2017), http://www.foundingaustin.com/home/ascendantcap (publishing a Schneider interview). The pair set out to establish a mechanism whereby they could generate exceedingly large fees and commissions for themselves through a series of limited partnership vehicles, which owned illiquid assets. Out of this concept, Schneider and Gentile created GPB Capital, an alternative asset management firm based in New York. The pair agreed to split their profits from GPB and Ascendant, but did not property disclose this secret deal to investors.

88. Schneider, working from Texas, was intricately involved in the business of GPB Capital. In fact, according to the above-referenced September 2017 interview, Schneider has admitted that he was the creator of the GPB structure “in 2013, [he] helped [Gentile] launch an income-producing private equity fund called GPB Holdings,” which was the first of the GPB Funds.

89. Apparently, realizing the huge fees that he could garner by his involvement in both operating the Funds, and acting as a broker in selling them, in 2015, Schneider “dedicated [his] company, Ascendant Capital, to structuring funds and raising capital exclusively for GPB.”

90. Gentile and Schneider used Schneider’s Austin-based firm Ascendant, a branch office of Axiom, to act as the principal distribution agent of GPB’s Offerings.

91. According to a March 28, 2015 Form ADV filed by GPB with the SEC, GPB describes itself as follows:

GPB is an investment adviser that structures, manages, promotes, sponsors, and through itself and affiliate entities serves as the general partner and/or investment manager of various limited partnerships (the “Funds”). GPB was formed in March of 2013 and is owned by David Gentile.

92. Neither the PPMs nor the Form ADV filed by GPB disclosed Schneider’s role as a co-founder and control person of GPB. Nor did they properly disclose that Gentile, the principal of the general partner of the issuer, had a majority ownership interest in the broker-dealer that was acting as the primary distribution agent for the GPB Funds. These material conflicts of interest were never fully disclosed throughout the GPB Ponzi scheme. Thus, investors did not know when they invested that Schneider and Ascendant, the lead broker for GPB securities, were conflicted by Schneider’s financial interest in GPB or that Gentile and GPB were conflicted by their interest in the broker selling GPB limited partnership interests.

2017: Photo from Jeffrey Schneider’s blog.

The Complaint. Note: Please hover your cursor over the document to invoke the page up/page down controls at the bottom of the page frame: