Written by The White Law Group• May 14, 2024• 2:30 am• Blog, Investment Loss Recovery

GWG Holdings Lawsuits: GWG L Bonds Recovery

GWG Holdings (GWGH) Update - GWG Life “L Bonds”, featured by top securities fraud attorneys, The White Law Group

The White Law Group is filing Claims involving GWG L Bonds, Liquidity Bonds –

The White Law Group continues to file securities claims against broker dealers who may have improperly recommended GWG Holdings offerings to investors. These lawsuits are alleging claims for violation of common law fraud, breach of fiduciary duty, negligence, and negligent supervision. The claims further allege that the brokerage firms failed to perform the necessary due diligence on these investments prior to recommending them to these particular investors.

Table of Contents

To learn more about the White Law Group’s FINRA claims involving GWG L Bonds please see the following:

Arete Wealth Management Claim
G.A. Repple & Co. Claim
Emerson Equity Claim
Westpark Capital Claim

GWG Holdings Inc. (GWGH) financed its portfolio of life insurance assets through the sale of alternative investment products, according to its website. 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 may come at a much greater risk to investors.

What Happened to GWG Holdings? Bankruptcy Case Update

GWG Holdings Inc. announced in August 2024 that its reorganization plan has been confirmed by the bankruptcy court. GWG Holdings has reportedly ceased operating, and all securities issued by the company, including common stock, preferred stock and GWG L bonds were cancelled.

According to news reports, investors were delivered interests in GWG Wind Down Trust, a Texas law governed liquidating trust. GWG Wind-Down Trust was established to wrap up GWG’s business affairs and monetize its non-litigation assets. The company previously noted in SEC filings that it doesn’t have the cash to repay bondholders now.

GWG will reportedly file a Form 15 with the SEC to provide notice of the suspension of its reporting obligations under SEC rules which will allow the company to cease filing any further periodic reports under the Exchange Act.

GWG’s CEO and CFO Resign

November 2022 – The executive reportedly resigned following an internal review that uncovered former board members’ concerns about an investment that were allegedly ignored, according to SEC filings. The resignations are reportedly related to the circumstances surrounding the departures of three directors last year.

GWG Holdings Files Chapter 11 Bankruptcy Protection

April 2022– According to a company press release on April 20,

2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy protection. This comes after the company reported in a new filing on April 1, that it would not be able to file its Annual Report on Form 10-K for the year ended December 31, 2021. Apparently, its independent registered public accounting firm quit in January. The company has missed numerous filing deadlines in the past.

According to the news release, GWG and its subsidiaries, GWG Life, LLC and GWG Life USA, LLC, have filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of Texas as part of a restructuring process. The company says it “expects restructuring to strengthen its financial position and enhance the value of its assets.”

GWG Fails to File 2021 Annual Report

April 4, 2022 – According to a new filing on April 1, GWG Holdings, Inc. is unable to file its Annual Report on Form 10-K for the year ended December 31, 2021, within the prescribed time period. The Company’s independent registered public accounting firm said in January it will not continue working with GWG. The Company is reportedly still in the process of reviewing potential candidates for a new auditor to audit its financial statements for the year ended December 31, 2021.

GWG Buys Time with Letter to Investors

February 14, 2022 – Those investors who were hoping to see a February interest payment from GWG Holdings may be sorely disappointed today. In a letter to investors on February 14, the company says while it is progressing in its work of “identifying and evaluating restructuring alternatives,” the monthly interest, and maturity payments, dividends and redemptions remain paused. The company says the process may take another 3-4 weeks and it will “inform you if and when we are able to restart these cash payments in the future.”

GWGH has been selling L Bonds since January 2012 under the name “Renewable Secured Debentures”. These debt securities were re-named “L Bonds” in January 2015, according to a June 3, 2020 prospectus. In 2020, the company launched a new offering called the Liquidity Bond 2020, constituting secured debt of GWG Holdings, Inc. 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 may come at a much greater risk to investors.

GWG Fails to Make Interest Payments for L Bonds

January 19, 2022 – According to filings with the SEC on January 18, due to the decreased sales of its L Bonds, GWG did not make the January 15, 2022 interest payment of approximately $10.35 million and principal payments of approximately $3.25 million with respect to its L Bonds. If the company fails to make the payments in the next 30 days it will result in default, according to the filing.

The company also noted that it believes that the filing of its Annual Report on Form 10-K for the year ended December 31, 2021, will likely be late as the independent registered public accounting firm it was working with declined to stand for reappointment. This would also likely result in a voluntary suspension of the sale of L Bonds.

GWG Fails to File Financial Reports and Suspends L Bond offering

September 8, 2021 – GWG has not filed its annual report for the year ending December 31, 2020, and has not filed its form 10-Q for the quarter ending March 31, 2021. GWG reported that it is working to complete restatements regarding the financial statements in its 2019 annual report and its quarterly reports for the first three quarters of 2020. GWG notes that it “is unable at this point to estimate when those restatements will be complete.”

After failing to timely file its 2020 annual report, GWG suspended its offering of L Bonds. Further, several members of the Board of Directors reportedly resigned in the second quarter of 2021.

On August 1, 2021 – GWG announced that its board of directors determined that certain previously issued financial statements including its annual report for the year ended 2019, and the quarterly reports for the first three quarters of 2020 “should no longer be relied upon.” GWG further noted that “these restatements do not arise from or cause any negative changes in the Company’s operations, the underlying economics attributable to the Company or its subsidiaries, the terms of the Company’s existing assets, or its expected prospects for future business.” GWG says that it continues to make all required payments under its L Bonds and preferred equity and is working on financing options to further supplement its cash position.

On September 7, 2021 – GWG announced it appealed the delisting of its stock by the Listing Qualifications Department of the Nasdaq Stock Market. As a result, GWGH will continue to be traded on Nasdaq, but must meet requirements that it will file past due financial statements through June 30, 2021 (by October 31, 2021,) and it will hold its 2020/2021 annual meeting by December 31, 2021.

What is an L Bond?

An L bond is a complex investment product 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.

L Bonds were publicly offered and sold on a continuous basis in 2014, 2017 and again in 2020 for a total of $4 billion in principal. The most recent offering will reportedly run on a continuous basis through June 2023, according to the prospectus.

The GWG L Bond prospectus notes, “An investment in the L Bonds involves significant risks, including the risk of losing your entire investment, and may be considered speculative.”

GWG L bonds are illiquid investments, and the shareholders cannot sell them on the secondary market. Shareholders must wait until the bonds mature to redeem the principal amount and they cannot redeem the bond before the maturity date or the death or disability of the original policyholder. According to its prospectus, if GWG agrees to redeem the bond for any other reason, the bondholder will be charged a penalty of 6%.

According to financial statements filed with the SEC in November 2020, the company warns “it may not be able to sell additional L Bonds on terms as favorable to the Company as past transactions or in quantities sufficient to fund all of the Company’s operating requirements.” Further, GWGH may not be able to obtain additional borrowing under existing debt facilities or new borrowings with other third-party lenders.

GWG issued a new series of “Liquidity” Bonds

The company issued two new series of L bonds in December 2020 called (the “Liquidity Bonds”). The Liquidity Bonds were being offered and sold to accredited investors as Reg D private placement investments. The company says the Liquidity Bonds would be issued as part of the Company’s strategy to expand its exposure to a portfolio of loans collateralized by cash flows from illiquid alternative assets. Six months after the issuance date of a Liquidity Bond, the holder may elect to exchange the Liquidity Bond, (at the beginning of each month and upon 30 days’ prior written notice to the Company) for that number of shares of the Company’s common stock.

Class Action vs. Individual FINRA Arbitration Lawsuit

People often wonder whether a large class action lawsuit is a better litigation option for them than an individual FINRA arbitration case. The answer depends on a number of factors but typically if the loss sustained is large (say larger than $100,000) an individual arbitration claim is likely a better option. Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually.

Filing a Complaint against your Brokerage Firm

Unfortunately, many investors are not fully aware of the problems and risks associated with illiquid, high risk, private placement investments such as GWG L Bonds (Liquidity Bonds).

Alternative investments are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, these investments are significantly more complex and often better suited for sophisticated and institutional investors.

Another problem often associated with these recommendations is the high sales commissions brokers typically earn for selling them– as high as 15%. Brokers have an obligation to make investment recommendations that are consistent with their clients’ risk tolerance, net worth, investment objectives and experience in the market.

In many cases, the high sales commission may provide some brokers with enough incentive to make unsuitable investment recommendations.

Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Firms that fail to do so, may be held responsible for any losses in a FINRA arbitration claim.

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.