Investors in securities sold by GWG Holdings (“GWGH”), including L Bonds, preferred stock, and common stock listed on Nasdaq under the ticker symbol GWGH, may have legal claims, including possible claims if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or financial advisor.
GWGH filed for federal Chapter 11 bankruptcy proceedings in Houston, Texas on April 20, 2022, blaming its financial dire straits on an inability to raise capital. The bankruptcy petition is accessible here 22.4.20 bk petition. In a bankruptcy court filing, GWG cited the Securities and Exchange Commission’s questioning of broker-dealers that sold more than $1.6 billion of its life-settlement backed bonds as a significant reason for the company’s collapse, which led to GWGH’s default on $13.6 million in payments due to in January. As GWGH stated in a court filing: “The SEC’s investigation, particularly its focus on how the bonds were sold by selling group firms, has had the effect of significantly impacting the company’s ability to access the capital market… .” “As a result, a number of broker firms indicated that they would not resume sale of the bonds until further notice due to concerns of getting involved further in the SEC’s investigation,” according to the GWGH declaration filed in bankruptcy court.
According to GWG’s website, Emerson Equity, a San Mateo, California-based broker-dealer that primarily sells private placements, is the managing broker-dealer for the GWG issuer. GWGH L Bonds were reportedly sold through network of 145 “member firms and registered investment advisors” according to filings by GWGH in bankruptcy court.
With regard to the life insurance policies owned by GWGH, bankruptcy court papers stated that most of the policies were acquired during a period ending in 2018, which may surprise some investors who were under the impression that the purchase of life settlements remained GWGH’s principal line of business. GWGH filings also indicated that the cost to maintain and service its portfolio of insurance policies is $5 to $7 million a month.
GWGH L Bonds are high-yield life insurance bonds used to finance the purchase of life insurance on the secondary market. Any type of investment in the secondary life insurance market is an extremely risky investment. Broker dealers are required to perform adequate due diligence on any investment they recommend. They must ensure that all recommendations are suitable for the investor. Recommendations should be in line with the investor’s age, risk tolerance, net worth, and investment experience. If brokerage firms fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses.
Investors who wish to discuss a possible claim involving GWGH securities may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).
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