Investor Update — Former GPB Capital Holdings CCO, Michael Cohn, Pleads Guilty to Stealing Government Information
As recently reported, the former Chief Compliance Officer of GPB Capital Holdings, LLC (GPB or the Company), Michael Cohn, has pled guilty to theft of government property. Specifically, the plea concerns allegations that Mr. Cohn provided confidential information about an SEC investigation into GPB around the time he was engaged in talks with certain GPB officers and executives about potential employment. Adding further gravity to the situation, Mr. Cohn is a former SEC compliance examiner.
GPB, formed by David Gentile in 2013, is an alternative asset management firm based in New York City. GPB is focused on the acquisition of income-producing private companies, primarily in the automotive and waste management sectors. The Company originally raised about $1.8 billion in investor equity. GPB’s funds were made available to investors though minimally regulated private placements under SEC Regulation D, utilizing numerous broker-dealers nationwide to sell the investments in GPB funds.
GPB’s recent track record has been suboptimal. The Company has been accused of not filing certain required audited financial statements with the SEC for two funds, as well as halting investor share redemptions. GPB reported significant declines in the values for several funds, in addition to disclosing a more than 45% decline in the value of regulated assets under management (decreasing to $238.6 million in July 2019 from $434.3 million at the end of 2017). The Company has been under investigation by federal authorities including the SEC, FINRA, and the FBI, and has been charged with violating state securities laws in Massachusetts. Against this backdrop, GPB is also being sued by numerous retail investors.
In October 2019, Mr. Cohn was charged with obstruction of justice, unauthorized computer access, and unauthorized disclosure of confidential information. As a former SEC compliance examiner, Mr. Cohn had access to information regarding the Commission’s investigation into GPB, and allegedly provided that information to GPB management as part of his obtaining employment. Sentencing for Mr. Cohn is expected in January 2021.
Investors in GPB funds may have recourse to recover their losses through securities arbitration before FINRA. Specifically, investors may be able to file arbitration claims against their financial advisor, as well as the brokerage firm, that were involved in recommending the sale of highly risky and complex private placement investments in certain GPB funds. Private placements are unregistered securities that are often accompanied by a private placement memorandum or other offering document that typically contains only extremely limited information as to the investment’s financials and risk factors.
Brokerage firms, and by extension their financial advisors, are legally obligated to perform adequate due diligence on any investment recommended to customers, including private placements offered under Regulation D. Furthermore, brokers and other financial advisors have a duty to disclose the risks associated with such an investment, as well as to conduct a suitability analysis to determine if the investment meets an investor’s stated investment objectives and risk profile.
If you have invested in any of the GPB funds and have suffered losses or are unable to exit your illiquid investment position and wish to learn more about your legal rights, you may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation. The attorneys at Giarrusso Law Group LLC have significant experience working closely with investors in complex and illiquid investments, including private placement offerings, to recover investment losses through securities arbitration before FINRA. Please note that claims against brokers or broker-dealers relating to the sale of GPB funds may be made independent of your concurrent involvement in any ongoing class action claims against GPB.