GPB and three executives were charged by the SEC with defrauding investors earlier this month.
The SEC has filed documents in the U.S. District Court for the Eastern District of New York arguing that an independent monitor be appointed to oversee GPB Capital Holdings after earlier this month the SEC charged GPB Capital and three of its executives with operating a Ponzi-like scheme that raised over $1.7 billion from investors. GPB Capital was also charged with violating whistleblower protection laws.
The requested independent monitor would have carte blanche over “all non-privileged books, records, and account statements for the entities and assets” of GPB’s portfolio companies and funds.
Additionally, the monitor would have access to any officer, employee, or outside advisor of GPB Capital if the monitor believes he or she would be relevant to their oversight.
The SEC outlined the monitor’s authority to either approve or disapprove of GPB’s actions, which include:
- Any proposed material corporate transactions by GPB and/or Highline Management (the firm overseeing GPB’s business affairs), the GPB funds or portfolio companies, or any other proposed material corporate transactions as deemed appropriate by the monitor;
- Any extension of credit by GPB, Highline, the GPB funds, or the portfolio companies outside the ordinary course of business;
- Any material change in business strategy by GPB or any of the funds;
- Any material change to the compensation of any executive officer, affiliate, or related party of GPB or Highline;
- Retention by GPB or Highline of any management-level professional or person, subject to an acceptable procedure agreed to with the monitor;
- Decisions to resume distributions to investors in any of the GPB funds, consistent with the investment objectives of the GPB funds; and
- Decisions to file, or cause to be filed, any bankruptcy or receivership petition for GPB, Highline, or the portfolio companies.
GPB responded to the lawsuits filed by saying it “has been cooperating . . . and is extremely disappointed by these developments. GPB denies the allegations and intends to vigorously defend itself in court[.] . . .”
On February 11, 2021, GPB agreed to the appointment of an independent monitor to oversee its operations.
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