GWG Holdings Inc.’s L Bonds

2024 GWG Bankruptcy and FINRA Arbitration Claims Update for L Bondholders by Iorio Altamirano LLP

Iorio Altamirano LLP Investigates Sales of GWG Holdings Inc.’s L Bonds by Emerson Equity LLC and Its Network of Broker-Dealers

Iorio Altamirano LLP, a nationally recognized securities arbitration law firm, is investigating potential lawsuits and arbitration claims related to investments in L Bonds offered by GWG Holdings, Inc. (GWGH). 

The GWG L Bonds came under pressure after GWG Holdings defaulted on its obligation to bondholders missing interest and principal payments on January 15, 2022. 

On April 20, 2022, GWG Holdings, Inc. ("GWG") filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas. 

GWG's Chapter 11 bankruptcy plan (the "Plan") went into effect on August 1, 2023. As part of the Plan, GWG's assets will be liquidated through the GWG Wind Down Trust.

As a result of the Plan going into effect, all securities issued by GWG, including GWG L Bonds, were canceled, and GWG ceased operating as a business.  L Bondholders received “Series A1 WDT Interests” in the GWG Wind Down Trusts in exchange for their L Bonds.

As the GWG Wind Trustee begins to liquidate GWG's assets, it is becoming more clear that the GWG L Bonds (the Series A1 WDT Interests) are nearly worthless. 

On October 13, 2023, the GWG Wind Down Trust sold two of its four assets for only approximately $10.5 million.  The GWG Wind Down Trust sold its largest tangible asset, its portfolio of life insurance policies, realizing only $10 million in cash. In addition, on October 13, 2023, the GWG Wind Down Trust sold its equity interest in Foxo Technologies, Inc. for $586,943. The $10.5 million in recovery represents approximately 0.0065% of the $1.6 billion in obligations owed to L Bond investors/creditors.

The third asset held by the GWG Wind Down Trust, its equity interest in BENF, also appears to have nominal value, with the BENF share price hitting an all-time low of  less than $0.05 per share on April 4, 2024, trading on 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, Beneficent only had $11.2 million in unrestricted cash. In mid-2023, Beneficent disclosed that it would meet its ongoing obligations by furloughing and potentially laying off employees. 
  • As of December 31, 2023, Beneficent’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.

Finally, the monetization of the fourth asset held by the GWG Wind Down Trust, its “retained causes of action” against entities such as BENF and its directors, is more speculative by the day, given BENF's poor financial condition.

Despite the unwelcome news, GWG L bond investors are not without recourse. GWG L Bond investors have retained 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. Collectively, the claims seek to recover over $10 million in losses and damages. 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.

Our law firm encourages investors who purchased the L Bonds offered by GWG Holdings to contact us for a free and confidential consultation to review their potential claims and legal rights.

GWG sold the L Bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. GWG may have sold as much as $2 billion of the high-yield L bonds over the past several years. The L Bonds were likely unsuitable for investors with a low-to-moderate risk tolerance or investors with liquidity needs.

Iorio Altamirano LLP's investigation has revealed that many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model beginning in January 2018. Essentially, GWG Holdings shifted the company from the life settlement business (purchasing life insurance policies from elderly individuals, paying the premiums on those policies, and collecting the death benefits upon the insured’s death) into a strategy that exposed the company to much riskier alternative assets. The reorientation changed GWG Holdings from a company speculating on life insurance policies into an even riskier and more speculative start-up attempting to “transform the alternative asset business.”

Additionally, many GWG L bond investors were not told by their financial advisors about the numerous red flags that existed before the investment recommendations, including the late filing of financial statements with the SEC, the resignation of the company's independent auditors, and the prior suspension of the sale of GWG L Bonds due to accounting questions.

Further, our investigation has revealed widespread failures by brokers to disclose to their customers that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

Iorio Altamirano LLP's investigation is not the only investigation into the sales practices of brokerage firms concerning GWG L Bonds. According to court filings, the SEC has been investigating the sales practices of the GWG L Bonds by the brokerage firms that sold the securities, including Emerson Equity and its network of regional broker-dealers, since mid-2021. 

On June 15, 2022, the SEC filed a lawsuit against Western International Securities, Inc., and several of its brokers in California Central District Court in connection with approximately $13.3 million in L bonds sold to retail customers. The firm is accused of failing to perform due diligence regarding the inherent risks associated with L Bonds.

The complaint alleges that although the prospectus for the June 2020 offering stated that L Bonds were only suitable for customers with “substantial financial resources,” Western International did not set any criteria or thresholds for its customers to invest in L Bonds. Western International Securities also did not restrict the sale of L Bonds to customers with certain risk profiles or investment objectives.

The lawsuit also alleges that the named brokers misunderstood important issues regarding GWG Holdings, Inc. and the GWG L Bonds, including that GWG significantly changed its business model beginning in 2018 and that GWG L Bonds were not directly collateralized by life insurance policies. As a result, the brokers recommended GWG L Bonds to retail customers without a reasonable basis to believe that the investments were in the customers’ best interest.

The filing of this lawsuit is significant as it confirms what we have suspected. We had believed for some time that many brokerage firms did not have the best interests of their customers in mind when they recommended GWG L Bond.

Based on our conversations with hundreds of GWG L Bond investors from across the country, there have been widespread failures by brokers and firms to provide fair and balanced point-of-sale disclosure regarding fees, costs, and risks to retail investors.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

GWG Holdings, Inc. and L Bonds

GWG Holdings, Inc. (GWGH) is a financial services company. Until 2018, GWG’s primary business purpose was acquiring life insurance policies in the secondary market and eventually collecting the death benefit on the policies once the insured passed away.  

GWG raised capital to fund its business by issuing L Bonds that were sold to retail investors through brokerage firms across the country.

GWG has sold nearly $2.0 billion in L Bonds since it began selling them in 2012. GWG sold approximately $453 million in L Bonds in the fourth offering, which began in June 2020.

GWG offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%. 

The L Bonds were speculative, high-risk, illiquid, and unrated alternative investments that were only suitable for customers with substantial resources. 

GWG’s business model has always been predicated on being able to sell and issue new L Bonds to generate revenue to be able to meet its financial commitments, which included paying the premium on the life insurance policies it owned, making high-yield interest payments to L bond investors, and funding its foray into the alternative asset business. 

Beginning in January 2018, GWG Holdings began to materially change its business model by entering into a series of transactions with The Beneficient Company Group, L.P.

By early 2019, Beneficient’s management had gained control over GWG, and the company’s founders seized control.

As a result of the new business model, GWG experienced accounting issues, which resulted in late SEC financial filings, independent auditor changes, and the suspension of selling L Bonds for significant periods of time. Between November 2018 and January 2022, GWG failed to file its financial statements with the SEC in a timely manner seven times and had three different independent auditors.

The company’s business model came under more pressure when it suspended the sale of L Bonds for seven months in 2021 due to accounting questions related to the delayed filing of its 2020 annual report. There was significantly less demand for L Bonds when the company began to sell the product again in late 2021.

As of September 2021, GWG had more than $2 billion in total liabilities, including $1.55 billion in L Bonds. According to SEC filings reviewed by our law firm, at that time, the company only had $42.2 million of cash on its balance sheet.

On January 15, 2022, GWG defaulted on its obligations by failing to make scheduled interest and maturity payments to L bondholders.   

The company filed for Chapter 11 bankruptcy on April 20, 2022.

GWG Holdings, Inc.’s L Bond Timeline
  • April 20, 2022: GWG Holdings, Inc. filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas. As a result of the bankruptcy filing, the accrued principal and missed interest payments of GWG L Bonds became immediately due to GWG L Bond investors; however, payment obligations are stayed as the case proceeds through bankruptcy court.
  • April 1, 2022: GWG Holdings, Inc. failed to file its annual financial statement for year-end 2021 on time, missing the deadline for the third time in the past four years.
  • February 14, 2022: GWG officially defaults on its obligations to L Bond investors as the company's thirty-day grace period expires. GWG confirms in a letter to investors that it will not make monthly interest and maturity payments on its L Bonds or dividend payments to preferred stockholders while the company continues to identify and evaluate restructuring alternatives with its advisors. GWG confirmed that it is also not accepting redemption requests while it continues the process of evaluating its options, which will take at least another three to four weeks and may take longer.
  • January 27, 2022: The Wall Street Journal reported that GWG is seeking rescue financing to avoid bankruptcy after accounting issues and the resignation of its auditor prevented the company from selling its products. In addition, the Wall Street Journal reported that the company is also exploring options such as refinancing its senior credit facilities and restricting the L Bonds. A Chapter 11 bankruptcy filing is reportedly a potential option for the company if all else fails.
  • January 24, 2022: GWG sent a notice to investors that it paused the sale of its L Bonds retroactive to January 10, 2022, and that it missed interest, maturity, dividend, and redemption payments on January 15, 2022. The notice disclosed that the company is working with its advisors and expects that the process of identifying and considering various alternatives will take at least three to six weeks and may take longer. The notice appeared to indicate that GWG Holdings did not intend to make the missed interest and maturity payments within the 30-day grace period. If that occurs, the company will be in an event of default, triggering the possibility of an acceleration of the outstanding principal.
  • On or about January 24, 2022: GWG retained the services of restructuring financial advisors, FTI Consulting, Inc., and law firm Mayer Brown LLP, as its restructuring legal advisors to assist the company in identifying and evaluating alternatives with respect to its capital structure and liquidity, as well as available options for maximizing the value of GWG’s assets and meeting its financial obligations.
  • January 15, 2022: GWG missed interest payments of approximately $10.35 million and principal payments of about $3.25 million to L Bond owners. According to the company’s SEC filings, GWG has a 30-day grace period to make the interest and maturity payments. If GWG fails to make the interest or maturity payments within the grace period, an event of default will result. At that time, the trustee or noteholders holding at least 25% in the aggregate outstanding principal amount of Bonds may elect to accelerate the L Bonds, causing them to be immediately due and payable, subject to certain conditions and notices. GWG also continues to defer requests for redemption by investors.
  • January 10, 2022: GWG paused L Bond sales while GWG works with its advisors to identify and evaluate options available to the company. This is significant because GWG relies significantly on L Bond sales to meet its ongoing financial obligations. GWG has disclosed that it is not likely to resume the sale of its L Bonds until it completes its 2021 annual financial statement. The company does not expect to complete an audit of its annual financials by the SEC’s March 31, 2022 deadline. Accordingly, L Bond sales are not expected to be resumed before that date.
  • December 2021 – January 2022: GWG’s L Bond sales were significantly lower than previous L Bond sales results and significantly lower than the sales that the company experienced upon re-opening L Bond sales after a suspension of sales in 2019. The company has disclosed that it cannot reliably estimate when L Bond sales could return to the level that it would generally expect to assist in meeting its ongoing financial obligations.
  • December 31, 2021: GWG’s independent auditor, Grant Thornton LLP, resigned. The company announced that its Annual Report on Form 10-K would likely not be completed on time by the March 31, 2022 deadline.
  • November 15, 2021: GWG and Beneficient Board of Directors approved a series of transactions that resulted in Beneficient becoming an independent company.
  • November 5, 2021: GWG filed an annual report for 2020 and discloses that it has substantial doubt about its ability to continue as a going concern due to its inability to raise capital, recurring losses from operations, negative cash flow from operations, delays in executing its business plans, and potential negative implications from an ongoing SEC non-public, fact-finding investigation.
  • August 17, 2021: GWG failed to file its quarterly statement for the second quarter of 2021 on time.
  • August 3, 2021: GWG disclosed that the company’s annual audited financial statements for 2019, as well as its quarterly financial statements for the first three quarters of 2020, could no longer be relied upon.
  • July 26, 2021:  the SEC tells GWG that some of its accounting related to Beneficient was incorrect.  Specifically, the SEC notified GWG that it would object to the company’s conclusion that Beneficent did not need to consolidate the ExAlt Plan Trusts.
  • July 7, 2021: GWG disclosed that it received a letter from Nasdaq indicating that the company’s common stock was subject to delisting from Nasdaq. In addition, GWG disclosed for the first time that the company had submitted two questions to the SEC Office of Chief Accountant on February 15, 2021. The questions submitted by GWG to the SEC were (1) whether the December 31, 2019 transaction resulted in GWG obtaining control of The Beneficent Company Group, L.P. in a transaction that constituted a change-in-control of Beneficent by entities not under common control, and (2) whether Beneficent was required to consolidate any of the ExAlt Plan trusts.
  • May 18, 2021: GWG failed to file its annual financial statement for year-end 2020 and its quarterly statement for the first quarter of 2021 in a timely manner.
  • April 17, 2021 – November 2021: GWG suspended its L Bond offerings because the company was working with its auditors and the Securities and Exchange Commission (SEC) to resolve two accounting questions relevant to its late annual report for 2020.
  • January 5, 2021: GWG received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (NASDAQ) notifying the company that it was not in compliance with the requirements of Nasdaq Listing Rule 5620(a) (the “Annual Meeting Rule”) as a result of not having held an annual meeting of stockholders within twelve months of the end of the company’s fiscal year ended December 31, 2019.
  • November 17, 2020: GWG failed to file its quarterly financial statement for the third quarter of 2020 on time
  • October 6, 2020: GWG received a subpoena to produce documents from the SEC’s Division of Enforcement, informing GWG of the existence of a non-public, fact-finding investigation into GWG Holdings. The scope of the investigation is unknown and ongoing.
  • September 23, 2020: GWG changed its independent auditor.
  • March 27, 2020:  GWG files earnings report including Beneficient results SEC later determined to be incorrect. 
  • November 22, 2019: The SEC requested that GWG produce unredacted copies of select sections of the company’s Form 10-K for the fiscal year ending December 31, 2018, and 10-Q for the quarterly period ending June 30, 2019.
  • August 15, 2019: GWG failed to file its quarterly financial statement for the second quarter of 2019 on time.
  • August 5, 2019: GWG’s registered public accounting firm, Baker Tilly Virchow Krause, LLP, resigns.
  • July 9, 2019: GWG filed its 2018 annual financials late and disclosed that a determination that Beneficient is an unregistered investment company under the Investment Company Act of 1940 would have serious adverse consequences.
  • June 3, 2019:  GWG, for the first time, transfers money to Beneficient. 
  • May 1, 2019 – August 8, 2019: GWG suspended the sale of L Bonds due to delays in filing various reports with the SEC.
  • 2018 – Early 2019: GWG entered into a series of transactions with Beneficient, an alternative asset company, that resulted in a significant reorientation of its business and capital allocation strategy towards an expansive and diverse exposure to alternative assets.
  • April 15, 2019: The founding stockholders of GWG sold their interests to Beneficient Company Holdings, L.P. and AltiVerse Capital Markets, L.L.C. The purchase agreement required that all sitting board of directors resign. Beneficient Company Holdings, L.P. appointed the new board.
  • April 2, 2019: GWG failed to timely file its 2018 year-end 10-K (annual report) with the SEC due to a delay in finalizing account the accounting for certain assets and liabilities exchanged in the strategic exchange of assets agreement with The Beneficent Company Group, L.P.
  • November 19, 2018: GWG filed its 10-Q (quarterly report) late. In the filing, GWG disclosed that due to the strategic exchange of assets agreement with The Beneficent Company Group, L.P., and other parties, GWG’s financial condition, including its ability to service its debt and meet its obligations as they become due, may be materially different than what can be discerned from a review of the company’s condensed publicly released financials.
  • August 10, 2018: GWG completed a deal with The Beneficent Company Group, L.P., and other parties, which governs the strategic exchange of assets among the parties. Beneficent Co. Group, LP, is a firm that provides financial services related to alternative assets. GWG Holdings’ indirect interests in other alternative assets are held and managed by The Beneficient Company Group, L.P. (“BEN LP,” including all of the subsidiaries it may have from time to time — “Beneficient”) and its general partner, Beneficient Management, L.L.C. Beneficient was formed in 2003 but began its alternative asset business in September 2017.
  • January 18, 2018: GWG files a Form 8-K with the SEC and publishes a press release announcing a partnership with The Beneficent Company.
GWG Holdings, Inc. and Emerson Equity LLC

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. Emerson Equity LLC, an SEC-registered broker-dealer and FINRA member based in San Mateo, California, received a commission ranging from 0.75% to 5.00% of the principal amount of the L Bonds sold.

Emerson Equity LLC also received additional compensation and commissions, up to 8% of the aggregate gross proceeds from the sale of L Bonds. The network of regional broker-dealers who sold L Bonds and shared in the commissions included Centaurus Financial, Inc., Aegis Capital, LLC, NI Advisors, Western International Securities, Inc., and other small or medium-sized brokerage firms.

Brokerage Firm Liability

GWG Panel Discussion held on September 20, 2022 with Prof. Benjamin Edwards, Daniel Girard, and August Iorio. Moderated by Jorge Altamirano.

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. The network of regional broker-dealers who sold L Bonds and shared in the selling commissions included the following firms, as well as other broker-dealers:

  • Centaurus Financial, Inc.
  • Western International Securities, Inc.
  • Center Street Securities.
  • Westpark Capital, Inc.
  • Moloney Securities.
  • Newbridge Securities Corporation.
  • Dempsey Lord Smith, LLC.
  • Great Point Capital LLC.
  • National Securities Corporation.
  • Aegis Capital, LLC.
  • Coastal Equities, Inc.
  • International Assets Advisory, LLC.
  • Arete Wealth Management, LLC.
  • Capital Investment Group, Inc.
  • Lifemark Securities, Corp.
  • Ausdal Financial Partners, Inc.
  • American Trust Investment Services, Inc. 
  • IFP Securities, LLC.
  • Cabot Lodge Securities LLC.
  • Kingswood Capital Partners, LLC.
  • American Trust Investment Services, Inc.
  • Paulson Investment Company LLC. 
  • Ages Financial Services, LTD.
  • Independence Capital Co., Inc. 
  • Landolt Securities, Inc.
  • Intervest International Equities Corporation.
  • NI Advisors.
  • M Stevens Securities, LLC.
  • TFS Securities, Inc. 
  • American Equity Investment Corporation. 

Brokerage firms are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. There are serious concerns that some broker-dealers recommended GWG’s L Bonds to customers without first conducting sufficient due diligence on the GWG L bonds or GWGH.

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.

Investors who purchased the GWG L Bonds offered through Emerson Equity LLC, Centaurus Financial, Inc., Aegis Capital, LLC, Western International Securities, Inc., or any other broker-dealer should contact Iorio Altamirano LLP for a free and confidential consultation. We will review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at or Jorge Altamirano at Alternatively, you may reach the firm by phone toll-free at (855) 430-4010.

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