August 24, 2021 – This morning, investors of GPB Automotive Portfolio LP woke up to more worrisome news, as the Wall Street Journal reported that the GPB Capital Holdings LLC, is looking to sell its largest dealership group, Prime Automotive, raising speculation that the GPB Automotive is running out of cash.
The latest news follows GPB Automotive’s regulatory filings in May 2021 that disclosed that there was substantial doubt that the business would survive, and July 2021 that disclosed that the Partnership was able to obtain a financing agreement with M&T Bank, but that the Partnership only had sufficient liquidity to meet its financial obligations through July 21, 2022.
In its latest regulatory filing, on August 16, 2021, GPB Automotive disclosed that it might sell dealerships to provide operational liquidity. According to the Wall Street Journal, such sales may be priced below fair value and go on the book as losses.
The forecast remains bleak for limited partners of GPB Automotive, who have endured years of bad news. In 2018, the Partnership stopped paying distributions to limited partners, and regulators launched investigations against the general partner, GPB Capital Holdings, LLC. In June 2019, GPB Automotive reported significant losses. The following month, David Rosenberg, a principal of Prime Automotive Group in Massachusetts, which GPB Automotive purchased, accused GPB Capital of running a “Ponzi-like” scheme. In June 2020, the State of Massachusetts filed a fraud complaint against GPB Capital Holdings. In February 2021, the SEC charged parent company GPB Capital and three individuals with running a Ponzi-like scheme that raised over $1.7 billion from securities issued by GPB Capital in four of its funds, including GPB Automotive. The SEC’s fraud case has been put on hold pending the outcome of related criminal fraud cases against GPB founder David Gentile and two others.
The cost for much of the legal defense is being paid for by GPB Automotive, a punch in the gut to limited partners who have not received a distribution since 2018. Worse, if the legal reserves are insufficient to cover the actual costs of the extensive legal actions, GPB Automotive may seek to claw back distributions that have already been paid to investors.
GPB Automotive investors may be disheartened, but they are not without options.
What can GPB Automotive investors do?
GPB Automotive investors should immediately contact a securities arbitration law firm to review their legal rights.
Investors who have purchased GPB Automotive through a broker or brokerage firm have successfully recovered investment losses by filing securities arbitration claims.
For example, earlier this month, a FINRA arbitration panel in New York, New York, ruled in favor of a brokerage customer that invested in GPB Automotive Portfolio LP and GPB Waste Management LP at the recommendation of his financial advisor at Hightower Securities, LLC.
The arbitration panel ordered Hightower Securities, LLC to refund $163,201 to the customer in exchange for returning the limited partnership interests, essentially making the customer whole. The customer had purchased the limited partnership interests for $170,000 and had previously received $6,799 from the investments as a return of capital.
Brokers and brokerage firms are obligated to make suitable recommendations in their customers’ best interests. Among other things, the broker must have a reasonable basis to believe that a recommendation is suitable for a customer based on the particular customer’s investment profile. In addition, the broker and firm must have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. FINRA has stated that “reasonable diligence” means that the firm’s and/or broker’s due diligence “must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.”
Brokerage firms may have failed to conduct reasonable diligence into the GPB funds before selling the private placement offerings to their customers. The firms’ compliance departments likely ignored or missed many red flags such as inflated revenue reports, fabricated profits, kickbacks, and investor funds being funneled into the pockets of GPB’s principals.
Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.
Investors that have purchased any of the following private placement investments issued by GPB Capital should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights:
- GPB Holdings, LP / GPB Holdings Qualified, LP.
- GPB Automotive Portfolio, LP.
- GPB Holdings II, LP.
- GPB Waste Management, LP.
If you lost money in the GPB funds, you might have a claim.
How to Recover GBP Investment Losses
Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.
We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.
If you have lost money on the GPB funds, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at firstname.lastname@example.org, email@example.com, or toll-free at (855) 430-4010 for a free and confidential consultation and review of your legal rights.