David Gentile, of Manhasset, and Jeffry Schneider, of Texas, convicted of fraud in multiyear financial scheme
U.S. Attorney for the Eastern District of New York Breon Peace. Credit: Craig Ruttle
A business executive from Manhasset and his associate were convicted Thursday of federal conspiracy and securities fraud charges related to what prosecutors said was a multiyear scheme that generated more than $1 billion and defrauded more than 10,000 investors.
David Gentile, 57, of Manhasset, the founder, owner and chief executive officer of GPB Capital Holdings LLC, and Jeffry Schneider, 55, of Austin, Texas, the owner and CEO of Ascendant Capital LLC, were convicted of conspiracy to commit securities fraud, conspiracy to commit wire fraud, and securities fraud following an eight-week trial, federal prosecutors said. Gentile was also convicted on two counts of wire fraud.
Prosecutors said Gentile and Schneider defrauded more than 10,000 investors by misrepresenting the source of funds used to make monthly distribution payments and the amount of revenue generated by three of GPB Capital Holdings’ investment funds.
Founded in 2013 by Gentile, GPB was the general partner of several investment funds that raised capital and invested it in a portfolio of private equity investments. GPB worked with Ascendant Capital, a marketing firm founded by Schneider, to market the GPB funds to investors, prosecutors said.
"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," Breon Peace, the U.S. attorney for the Eastern District of New York, 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."
Between August 2015 and December 2018, 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.
But that was not the case, according to prosecutors. When the funds’ performance lagged, Gentile and Schneider tried to disguise the shortfall with fraudulent, backdated documents and paid investor distributions out of investor capital, prosecutors said, adding that Gentile and Schneider were aware that the GPB funds were underperforming and authorized the fraudulent distribution payments.
Defense attorneys for Gentile and Schneider did not immediately respond to messages seeking comment.
Nicole Fuller is Newsday's senior criminal justice reporter. She began working at Newsday in 2012 and previously covered local government.
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