Update on GWG Holdings Inc. (Nasdaq GWGH) Securities Fraud Investigation 

The White Law Group continues to investigate potential securities claims involving broker dealers who may have improperly recommended GWG L Bonds to investors. Our firm is currently representing numerous investors who have lost money investing in the high risk offering.  To learn more about these FINRA claims, please see: Center Street Securities Lawsuit Involves GWG L Bonds and other… and The White Law Group Announces another Lawsuit Involving GWG L Bonds .)   

Many GWG L Bond investors are waiting for news about the company’s bankruptcy filing on April 20, 2022. What does it mean for shareholders? The company is in default after failing to make interest payments to L bond holders in January and February of this year. Payments are still not being made to investors, the company has huge debts and its assets are all held by other companies. It seems unlikely that investors will be able to recoup their investment from GWG directly. It may take quite some time for the bankruptcy case to be sorted.  

Regulators go after Firms for Recklessly Recommending GWG L Bonds to Investors 

Unfortunately, countless broker dealers and registered investment advisors sold these high-risk L-Bonds to clients allegedly touting it as a safe investment. 

According to a press release on June 16, 2022, the Securities and Exchange Commission charged registered broker-dealer Western International Securities, Inc. and five of its brokers with violating Reg BI (Regulation Best Interest) when they recommended and sold bond offerings from GWG Holdings to retirees and other retail investors.   

Western International reportedly sold $13.3 million in GWG L Bonds between July 2020 and April 2021, to retail customers, many of whom were on fixed incomes and had moderate risk tolerances, despite GWG Holdings, Inc., stating the L bonds were “high risk, illiquid, and only suitable for customers with substantial financial resources.”   

What is an L Bond? 

An L bond is an alternative investment vehicle that attempts to provide a high yield for a lender in exchange for bearing the risk that an insurance policy premium or benefits may not be paid. An L bond is an unrated life insurance bond that is used to finance the purchase and premium payments of life insurance settlement contracts purchased in the secondary market, according to Investopedia.   

GWG Holdings finances its portfolio of life insurance assets through the sale of alternative investment products, such as debentures and L-bonds. Although these products are touted as offering potentially higher yields than other investment assets that are correlated with the traditional stock and bond markets, they came at a much greater risk to investors as they had no credit rating and were not insured. According to the GWG L Bond prospectus, “An investment in the L Bonds involves significant risks, including the risk of losing your entire investment, and may be considered speculative. Importantly, we maintain a senior borrowing arrangement that subordinates the right to payment on, and shared collateral securing, the L Bonds to our senior secured lender.”   

GWG Holdings – Downward Spiral  

The last few years have been a rocky road for GWG Holdings beginning with a “Strategic Partnership” with the Beneficent Group (BEN) in December 2018, which reportedly led to affiliates holding all of GWG’s assets, as the company filed for bankruptcy. Here is a timeline of events: 

February 2020 – GWG expands partnership with BEN, then fails to file financial reports with the SEC

August 1, 2021- GWG suspends its L bond offering, fails to file financial reports

January 18, 2022 – GWG defaults on $13.55 Million in interest and principal payments to investors, fails to file annual report

February 14, 2022 – GWG in default again after failing to make second interest payment

April 06, 2022 – Nasdaq Stock Market notifying the Company that it was not in compliance with requirements of Nasdaq Listing Rules after failing to file its Annual Report

April 20, 2022 – GWG Holdings files for Chapter 11 Bankruptcy Protection

June 2022 – SEC Charges Western International & Reps with Reg BI Violations re GWG L Bonds

Lawsuits to Recover Investment Losses 

The White Law Group is investigating the liability that FINRA registered brokerage firms may have for improperly selling high-risk investments, like GWG L Bonds, to investors.    

Brokerage firms are required by the Financial Industry Regulatory Authority (FINRA) to disclose all the risks of an investment, prior to making recommendations to an individual investor. Recommendations should only be made if the investment is suitable for an individual investor given their age, investment objections, investment experience and risk tolerance.   

Brokerage firms that do not perform adequate due diligence on an investment and/or make unsuitable recommendations can be held accountable for investment losses through FINRA Dispute Resolution.   

To learn more about the White Law Group’s ongoing investigation, please see:   

GWG Holdings Investigation: Another Missed Interest Payment leaves Questions for Investors    

GWG’s L Bonds & the Liquidity Bond 2020   

GWG Renewable Secured Debentures Investigation   

If you are concerned about your investment in GWG L Bonds, the securities attorneys at The White Law Group may be able to help you.  Please call the offices at 888-637-5510 for a free consultation.   

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.   

For more information on The White Law Group and its representation of investors in FINRA arbitration claims, visit https://www.whitesecuritieslaw.com.