Articles Posted in NI Advisors

In a court filing made on December 15, 2022, in the Chapter 11 bankruptcy court, the Official Committee of Bondholders of GWG Holdings Inc. (“Bondholder Committee”) alleged that broker-dealers sold GWG L Bonds using aggressive and misleading marketing even after it became clear that GWG’s business was failing and that the only way to repay bondholders was to continue to sell more L Bonds to existing and additional retail investors.  The Bondholder Committee, which represents the interests of GWG L Bondholders in the Chapter 11 bankruptcy proceeding, alleged that “GWG was a class Ponzi Scheme.”

However, much of the court filing, including specific allegations of wrongdoing, was filed under seal.

On February 1, 2023, the United States Bankruptcy Court for the Southern District of Texas unsealed several significant court filings, including a draft adversary legal complaint against certain current and/or former directors and officers of GWG Holdings, Inc., individuals, and corporate entities affiliated with or controlled by Brad Heppner, transferees of certain fraudulent transfers, and key broker-dealers who marketed and sold L Bonds.

**Update: February 1, 2023** On February 1, 2023, the United States Bankruptcy Court for the Southern District of Texas unsealed several significant court filings, including a draft legal complaint.  The complaint was filed by the Official Committee of Bondholders of GWG Holdings Inc. (“Bondholder Committee”) against certain current and/or former directors and officers of GWG Holdings, Inc., individuals, and corporate entities affiliated with or controlled by Brad Heppner, transferees of certain fraudulent transfers, and key broker-dealers who marketed and sold L Bonds.  The Bondholder Committee represents the interests of GWG L Bondholders in the Chapter 11 bankruptcy proceeding.

The unsealed complaint has revealed the following allegations, which were made after the bondholder committees reviewed documents and information that are currently not in the public domain:

  • Together with other insiders, Brad Heppner was the mastermind behind a Ponzi scheme whereby GWG, in conjunction with its broker-dealer network, sold hundreds of millions worth of L Bonds to retail investors even when it became clear that the only way to repay those investors was to sell yet more L Bonds to more retail investors.

After months of working with legal and financial advisors to try and restructure outside of court, on April 20, 2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas. The bankruptcy filing is a significant and troublesome development for GWG L Bond investors who invested substantial portions of their life savings into GWG L Bonds. According to GWG’s latest filing with the SEC, GWG has more than $1.6 billion in aggregate principal outstanding to GWG L Bond investors. A Chapter 11 bankruptcy will allow GWG Holdings to propose a reorganization plan.

Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.  Despite the unwelcomed news, GWG L bond investors are not without recourse. Many retail investors, including those represented by securities arbitration law firm Iorio Altamirano LLP, are filing securities arbitration claims against brokerage firms that sold these speculative, high-risk, and illiquid financial products.  These actions are separate and in addition to the bankruptcy proceedings.

GWG Holdings’ bankruptcy filing revealed for the first time that the ongoing investigation by the United States States Securities and Exchange Commission (SEC) includes an examination of sales practices of the GWG L Bonds by the Selling Group, including  Emerson Equity LLC and its network of regional broker-dealers.  According to the recent bankruptcy filing, the SEC issued subpoenas and document requests to individual brokerage firms beginning in late-2021.

New York securities arbitration law firm Iorio Altamirano LLP is investigating potential securities arbitration claims against Emerson Equity LLC and its network of broker-dealers for their sale of L Bonds issued by GWG Holdings, Inc. (Nasdaq: GWGH).

On January 15, 2022, GWG Holdings Inc., a company known for selling life-insurance bonds, missed interest and principal payments to L bond investors. The company is also reportedly seeking rescue financing in an effort to avoid bankruptcy after facing a series of accounting issues, financial stress, and an SEC investigation.

GWG’s L Bonds are speculative, high-risk, and illiquid securities that were sold as private placement offerings.

Contact Information