GWG L Bonds Update: GWG Wind Down Trust Files Quarterly Report (February 15, 2024)

On February 15, 2024, the GWG Wind Down Trust filed a status report with the United States Bankruptcy Court for the Southern District of Texas for the quarter ending December 31, 2023. Although the status report did not include an updated financial statement, there are several key takeaways:

• The GWG Wind Down Trust has sold two of its three tangible assets for a total of approximately $10.58 million.
• The sale of its life insurance policy portfolio generated $10 million in cash.
• The sale of shares in FOXO stock generated $586,942.
• The GWG Wind Down Trust settled a dispute with Fifth Season Investments, LLC for $8 million. Thus far, the Trust has paid $1,848,738 in cash to Fifth Season, still owing $6,151,262. The GWG Wind Down Trust previously set aside a reserve of 20 million shares of BENF. Those shares currently have a book value of $5.12 million. Accordingly, there is currently a $1 million shortfall, which the GWG Wind Down Trust will need to pay out of its cash holdings, presumably diminishing the cash it received from the sale of two of its three tangible assets.
• The $10.5 million in cash proceeds represents approximately .0065% of the 1,618,517,956 in Series A1 (formerly L Bonds) WDT Interests.
• The third tangible asset owned by the GWG Wind Down Trust is 169,701,487 shares of Beneficient (NASDAQ:BENF).
• The Beneficient share price has dropped significantly since going public at $15 per share. On June 20, 2023, the share price closed at $4.57. By August 1, 2023, the share price closed at $2.00. On February 15, 2024, the share price closed at $0.2561.
• The GWG Wind Down Trust is finding it difficult to sell its shares in Beneficient. There appears to be little to no interest on behalf of investors in purchasing shares of BENF, with shares trading in a very thinly traded market.

We believe that there is no obvious or foreseeable path to monetization for the GWG Wind Down Trust. Beneficient has made the following disclosures since August 2023:

• On June 29, 2023, Beneficient received a “Wells Notice” from the SEC’s Division of Enforcement, stating that the SEC has made a preliminary determination to recommend that the SEC file a civil enforcement action against the company alleging violations of certain provisions of the Securities Act and the Securities Exchange Act relating to the Company’s association with GWG Holdings. In addition, the company’s Founder, CEO, and Chairman, Brad Heppner, also received Wells Notices related to the investigation of GWG Holdings.
• Beneficient sustained an operating loss of $2.45 billion between April 1, 2023, and December 31, 2023.
• As of December 31, 2023, Beneficient only had $11.2 million in unrestricted cash. In mid-2023, Beneficient disclosed that it would meet its ongoing obligations by furloughing and potentially laying off employees.
• As of December 31, 2023, Beneficient’s assets were approximately $500 million, down from $2.9 billion as of 3/31/2023, driven by a goodwill impairment of $2.28 billion.

The only other asset owned by the Wind Down Trust is a beneficial interest in the GWG Litigation Trust. However, the Litigation Trust is only in an information-gathering phase.

When Can GWG L Bond Investors Expect to Receive a Payment (Distribution) from the GWG Wind Down Trust?

The GWG Wind Down Trust has not determined when a distribution will be paid. Distributions can only be paid upon receipt of sufficient cash proceeds from the assets to be able to make a distribution.  The sale of the life insurance portfolio and FOXO shares, which generated only $10.5 million in cash, is below the minimal threshold needed for the GWG Wind Down Trust to make a distribution.

The GWG Wind Down Trust has only two more ways to generate cash: (1) the sale of its stock in Beneficient and (2) receiving proceeds from the GWG Litigation Trust. Whether the GWG Wind Down Trust will be able to monetize these two assets remains unknown, and some believe it is doubtful.

However, that has not appeared to stop some brokers from still telling investors that they will receive most or all of their invested capital back. We believe that these assurances are not only false but irresponsible. The GWG Litigation Trustee recently published a letter to GWG Investors where he addressed these unsupported assurances:

Over the past few months, numerous investors have reached out to me inquiring when they will receive their money back because their brokers have assured them they will receive all their money back. To be completely candid, I simply don’t understand how anyone can make any such assurances at this point in time.

To that end, I strongly encourage all GWG investors to consult their own independent counsel to discuss any potential claims they may have against any third parties who may have recommended this investment to them.

To put it simply, no one knows when or if the GWG Wind Down Trust will be able to make any distributions, but the outlook gets bleaker with every update.

How Else Can GWG L Bond Investors Recover Their Investment Losses?

Many GWG L Bond investors have retained securities arbitration law firm Iorio Altamirano LLP to file FINRA arbitration claims against brokerage firms that sold these speculative, high-risk, and illiquid financial products to recover their investment losses. These claims are separate and in addition to the liquidation of GWG through the GWG Wind Down Trust.

We continue to believe that GWG L Bonds investors’ best avenue for potential recovery of losses is to file a separate FINRA arbitration claim against their brokerage firms. Iorio Altamirano LLP has already helped GWG L Bond investors recover nearly $2 million in losses.

If you would like more information about how to file a claim, please respond to this email to schedule a free and confidential consultation.

To read more about our investigation into the sale of GWG L Bonds to retail investors and to watch videos of our GWG Panel Discussions, please visit our investigation page: www.gwglawyer.com

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (855) 430-4010.