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GWG L Bonds: Investors May Be Able to Recover Investment Losses Following Bankruptcy *UPDATES*

Feb 8, 2022 Current Investigations

Did you invest in GWG L bonds? You may be able to recover losses. GWG Holdings' interest payments on risky L Bonds stopped in January 2022. The SEC has begun an investigation into GWG Holdings (NASDAQ: GWGH), a financial services firm in Dallas, Texas. GWG Holdings has filed for chapter 11 bankruptcy after failing to make $1.6 billion in L Bond payments. According to the Wall Street Journal, GWG is seeking court approval for a $65 million loan to continue operations. 

In February 2022, investors alleged that Brad Heppner, the Chairman of GWG Holdings' board, used GWG Holdings to enrich himself. He allegedly directed investor funds to The Beneficent Company Group—a company he controlled. Investors alleged that this money was not used for its stated purpose, and was instead misappropriated through a series of complex transactions. 

On April 6, 2022, GWG Holdings received a letter from NASDAQ stating that the company was no longer in compliance with listing requirements. This stems from GWG's failure to file an Annual Report at the end of 2021. In January, GWG Holdings' independent accounting firm declined to stand for re-appointment, which affected GWG's ability to file its report by the March deadline. GWG Holdings must submit a plan to regain compliance in order to remain listed. In a letter to investors dated January 24, 2022, GWG Holdings states that it had paused L Bond sales retroactively to January 10, 2022, while the company decided how best to move forward.

Despite the company's financial state, investors may be able to recover their GWG investments. GWG L Bonds may have advertised interest rates of 5% to 8%, which is a tempting rate of return for many investors. The Wall Street Journal reports that many of the investors were elderly or retired. If your broker failed to tell you about the risks involved in this speculative investment, then the firm may be liable for your losses. Contact a securities attorney for a free case evaluation today. 

GWG Interest Payment Date

Today, the GWG website simply states, “the sale of L Bonds is paused.” GWG Holdings failed to make a $10.35 million interest payment on January 15, 2022, and also failed to make a principal payment of $3.25 million for L Bondholders. GWG also deferred requests for redemptions.

The GWG prospectus states that GWG Holdings relies on sales of L Bonds to meet its financial obligations to investors. December 2021 to January 2022 saw significantly lower numbers than previous sales results for GWG L bonds. This led to its failure to adhere to the promised interest payment date on GWG L Bonds. 

L Bonds are highly illiquid and do not have a secondary market where investors can sell their investment—they can only redeem their purchase with GWG. Since GWG Holdings has stopped honoring redemptions, there is no way for investors to get any of their money back, unless they can successfully argue their stockbroker or financial advisor should never have recommended L Bonds in the first place.

SEC Investigation

On October 6, 2020, GWG Holdings received a subpoena from the Securities and Exchange Commission Division of Enforcement to produce documents as part of an ongoing, fact-finding investigation. Investigations are usually non-public, and the SEC has not yet published the results of its investigation.

What is a GWG Holdings L Bond?

GWG L Bonds are risky, non-traded corporate bonds. GWG pools money from investors and uses it to purchase insurance policies. These types of investments are speculative and provide high returns only if the original policyholder died before GWG paid too many premiums.

GWG L Bond Reviews

Investors have reported that they believed L Bonds could offer reliable payouts, something many investors were looking for in their retirement. L Bonds are alternative investments, and should not have been sold to conservative investors, especially not to investors who rely on their GWG investments for income. 

Stockbrokers must only recommend investments that suit their investor’s needs. Age and financial goals are two factors that stockbrokers must consider when evaluating an investment’s suitability. Stockbrokers at Emerson Equity in San Mateo, California, as well as R.F. Lafferty & Co. in New York City, New York, may have persuaded investors to purchase millions of dollars worth of L Bonds, and many of those investors are now seeking to recover their losses.

Investors who have worked with either stockbroker and are unhappy with their L Bonds' performance should get in touch with a securities attorney at Kurta Law: (877) 600-0098. 

How Can Investors Recover Their Money?

The best way for investors to recover their money is to file a complaint and work with a securities lawyer. Securities lawyers can help investors navigate FINRA arbitration—a dispute resolution forum that many investors agree to use when they enter into an agreement with a brokerage firm. If you lost money on GWG Holdings L Bonds, reach out to a securities lawyer at Kurta Law for a free case evaluation.