In January 2022, GWG Holdings Inc., which sold its high-risk L Bond through a series of securities brokerages, missed millions in payments to investors. The company is now preparing for bankruptcy. However, investors still have recourse to pursue the brokerages selling the inappropriate L Bonds.
The Financial Industry Regulatory Authority (FINRA) offers arbitration against the brokerages selling the GWG L Bonds. FINRA arbitration is a legal specialty which only a relatively few attorneys have. We have handled hundreds of FINRA, NYSE and NASD arbitrations over the past 20 years. Jeffrey Pederson has also been repeatedly recognized as a top securities litigation/arbitration attorney.
The GWG bankruptcy will be substantial. Since 2020, GWG issued separate offerings in the amount of $1 billion and $2 billion. However, these troubles are not new and many of the GWG “bonds” were sold inappropriately by brokerage firms for years. Investors have previously obtained recovery through FINRA. Future recovery for L Bond loss is also possible through FINRA.
GWG has a history of trouble. In 2020, the SEC opened an investigation in GWG concerning its accounting practices and the sales of its L-Bonds. Later that year, the ongoing SEC investigation of GWG led the company to state that the investigation was interfering with its plans to implement its business model.
In 2021, further problems came to light. GWG failed to make timely filings with the SEC. GWG was also delinquent in many other regulatory obligations. By the end of 2021, GWG’s auditing firm ended its relationship with GWG. In January 2022, GWG defaulted on its obligations to pay investors. By February, GWG had failed to cure the default.
Emerson Equity, a San Mateo, a California-based brokerage, worked as the managing broker for the GWG L Bonds, and raised money to finance the acquisition of life insurance policies on the secondary market, or life settlements. These bonds were then inappropriately distributed by Emerson and retail brokerages. The sales at the retail brokerages were sometimes motivated by relatively high commissions.
Many investors purchased the “bonds” because of the safety commonly affiliated with bonds. These investments were anything but safe. The L Bonds are more adequately described as a viatical fund. Viaticals are risky investments where the life insurance of another is purchased and money is made betting that that the seller of the policy will die sooner than calculated by the insurance actuaries.
It’s not clear how many other broker-dealers also sold the GWG L Bonds, but products of this type are typically sold through a network of a few dozen firms. Many firms are known as selling GWG including Cabot Lodge, Moloney Securities, WestPark Capital, and Madison Avenue Securities. Brokers at these firms, and other troubled firms, are suspected of inappropriately selling these L Bonds.
Please contact us if you lost savings because of the GWG L Bond. Jeffrey Pederson has represented investors across the country for 20 years. Located in Colorado, he has represented investors in 47 states concerning financial advisor negligence and fraud. Call 844-253-5858 toll-free or 303-300-5022.