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GPB Capital Holdings Losses with Kalos Capital, Inc. Broker Eric Weschke

Posted on Tuesday, October 8th, 2019 at 7:20 am    

GPB Capital Holdings

Erez Law is currently investigating Kalos Capital, Inc. broker Eric Weschke (CRD# 2486324) regarding GPB Capital Holdings losses. Weschke has been registered with Kalos Capital, Inc. in Setauket, New York since 2011.

GPB Capital Holdings is a New York-based investment firm that offers exempt, private-placement securities that inherently have a high degree of risk due to their nature as unregistered securities offerings (and without regulatory oversight). The investment firm raised $1.8 billion from investors through private placements that invested in automotive dealerships, the waste management industry, and middle market lending. These investments were high risk and high commission (nearly 8%) private placements.

GPB Capital Holdings was launched in 2013 with a focus on buying auto dealerships. According to the SEC, GPB Automotive Portfolio raised $622.1 million from wealthy investors since 2013, and the minimum investment in GPB Automotive Portfolio was $100,000. GPB Holdings II raised $645.8 million since 2015. GPB Holdings II and GPB Automotive Portfolio together have paid brokers $100.1 million in commissions at a rate of 7.9%.

As of July 2019, GPB Capital Holdings is more than a year past its deadline to make public its audited financial statements for two of its largest funds. In June 2019, GPB Capital Holdings reported losses in the value of two of its investment funds: GPB Holdings II and GPB Automotive Portfolio. GPB Holdings II saw a decline in value of 25.4% and GPB Automotive Portfolio have decreased by 39%. GPB Holdings II and GPB Automotive Portfolio make up the majority of GPB Capital Holdings’ portfolio, raising $1.27 billion from investors.

GPB Capital Holdings manages the following nine private placements:

  • GPB Automotive Portfolio, LP
  • GPB Cold Storage LP
  • GPB Holdings, LP
  • GPB Holdings II, LP
  • GPB Holdings III, LP
  • GPB Holdings Qualified, LP
  • GPB NYC Development, LP
  • GPB Waste Management Fund, LP

GPB Capital Holdings other funds also reported declines in estimated value of 25% to 73%.

According to an article in InvestmentNews, “the company noted that if distributions were added to the fair market value, investors did better. The distributions in the GPB funds are not returns on the investments but a return of a small piece of investors’ initial capital. Adding in distributions, investors in GPB Holdings II and GPB Automotive Portfolio saw decreases in their investments, respectively, of roughly 13% and 25%, according to the company.”

In October 2000, Weschke was sanctioned to special supervision by the Virginia Division on Securities regarding, “Based on Mr. Weschke’s disciplinary history, mr. Weschke and the employing bd firm, self trading securities, inc. Agreed as a condition of registration to be bound by a special supervision order, which requires additional monitoring of mr. Weschke’s activities for a period of 12 months.”

In June 2000, the Ohio Division of Securities revoked Weschke’s registration regarding, “the applicant was not of good business repute.”

Weschke has been the subject of 14 customer complaints between 1998 and 2019, according to his CRD report. Recent cases are regarding:

September 2019. “In February 2019, client invested approximately $127,000 in GPB related products. Client also invested in nine other products but arbitration doesn’t address those investments. Claim is against BD and alleges breach of fiduciary duty, breach of contract, etc. Does not specifically allege unsuitable transactions.” The customer is seeking $127,000 in damages and the case is currently pending. This case is regarding private equity.

February 2019. “Unsuitable investment recommendations, breach of fiduciary duty, failure to supervise during the time period October 2015 – 2017.” The case is currently pending. This case is regarding real estate securities and private debt, including business development corporations (BDCs).

February 2019. “Breach of fiduciary duty, unsuitable recommendations during the time period October 2015 – 2017.” The customer is seeking $200,000 in damages and the case is currently pending. This case is regarding real estate securities and private debt, including BDCs.

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Kalos Capital, Inc. may be liable for investment or other losses suffered by Weschke’s customers.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.