New York Scientology donor David Gentile convicted in federal fraud case
Jeffrey Augustine has been on the story of wealthy Scientologist David Gentile from the beginning. So we asked him to summarize yesterday’s big result in court in Brooklyn…
Scientologist David Gentile and his criminal co-defendant Jeffry Schneider were convicted on all counts by a jury in the US Federal Courthouse in Brooklyn yesterday.
Their convictions followed a seven-week trial during which federal prosecutors laid out an extremely detailed case of securities fraud, wire fraud, and conspiracy, arguing that the defendants had misled investors in a Ponzi-like scheme.
Gentile and Schneider spent only three days presenting their case which, according to our sources, came down to these arguments:
1. We disclosed to investors in writing that they could lose some, or all, of their investment.
2. We had no intention to defraud investors.
3. Some of our investments made money.
The jury spent only four hours deliberating before handing down their verdict.
The GPB Capital Holdings criminal case began in 2021 with the indictment of the principals: GPB Capital CEO David Gentile and his partner Jeff Lash. Also indicted was Jeffry Scheider of Ascendant Capital, who promoted GPB Capital investments to Broker-Dealers across America. These Broker-Dealers sold GPB Capital to older investors who, in the zero percent interest environment of the 2010's wanted the 8 percent return on investment GPB Capital guaranteed.
The trouble began when GPB Capital's portfolio companies did not meet earnings targets. The 8 percent distributions could not be paid from earned income. Therefore, GPB Capital paid distributions from the investors' own money.
We make an important distinction here: In a traditional Ponzi scheme, no assets are ever purchased. It is all a con game in which new investor money is given to prior investors in a pyramid scheme. GPB Capital was called a "Ponzi-like scheme" by US prosecutors because while it did purchase assets, those assets did not perform as promised. Therefore, investors were paid distributions using the money they had invested. Part of the charged crimes were that GPB Capital did not disclose this. Instead, the defendants knowingly filed fraudulent documents with the US Securities and Exchange Commission claiming actual profits were made. GPB Capital also told its investors the same lie.
The losses were internally papered over with "performance guarantees" provided by Jeff Lash, a co-founder of GPB Capital who later left the firm. To simplify it, Lash essentially wrote IOU's which were then booked as actual revenues and recorded with the SEC.
Jeff Lash was indicted along with Gentile and Schneider in 2021. Lash, however, made a plea deal with the US Government. His guilty plea required him to allocute in open court which he did. Specifically, Lash testified that he transferred $1.2 million from his personal bank account to GPB Capital's corporate account controlled by Gentile. This money was then booked by Gentile as income from earnings. This fraudulent transfer constituted wire fraud which is a crime punishable by up to 20 years in prison. Gentile was convicted on two counts of wire fraud and three other felonies.
Sentencing is scheduled for October 28. According to a Department of Justice press release, Gentile and Schneider face up to 20 years in prison.
— Jeffrey Augustine
Jeffrey has also summarized the case in a new video at his channel.
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I had no idea there were palm trees in Boston.
Why is it that so many ponzi or ponzi-like schemes are run by $cientologists? I guess it just shows that financial markets don't respond to 'postulates'. Or voodoo or the entrails of a goat or Lron's simple scams.