SSEK Law Firm Continues Investigation into GWG Holdings Who Files For Chapter 11 Bankruptcy Protection

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Apr 26, 2022, 05:00 ET

Issuer of L Bonds Says SEC's Probe Contributed to Its Demise

DALLAS, April 26, 2022 /PRNewswire/ -- GWG Holdings, Inc. (GWGH) voluntarily filed for Chapter 11 bankruptcy protection. The move was expected in the wake of the regulatory and financial woes plaguing the Dallas-based alternative firm.

GWG Holdings' bankruptcy is bad news for investors, many of whom are retail customers, including elderly investors and retirees. In February 2022, the company, which sold $1.6B in life-settlement backed bonds via independent brokerage firms, had defaulted on $13.6M in principal payments and interest it owed investors of its L Bond series.

In its bankruptcy filing, GWG Holdings said that the SEC's investigation into brokerage firms for selling L-Bonds to their customers contributed to the alternative asset firm's collapse. Some 145 broker-dealers, including managing brokerage firm Emerson Equity, sold L Bonds to investors.

GWG stated that after it resumed the sale of these high-yield bonds in December 2021, the SEC began sending subpoenas to the brokerage firms that were selling or thinking of selling GWG L Bonds. These firms then became reluctant to sell financial instruments to clients, which led to significantly low sales.

GWG Holdings said that all of this affected its ability to "access the capital markets." The company stopped selling L Bonds again in January 2022.

Our securities lawyers represent investors in FINRA arbitration against the brokerage firms that unsuitably sold these junk bonds to them and misrepresented the high risks involved.

Suspension of L Bond Sales Spelled Trouble for Investors and GWG

GWG Holdings currently has about $2B in total liabilities and over $3.4B in assets from secondary-life insurance policies and interests in two unaffiliated entities. The alternative asset firm's merger with Beneficent Co. Group, LP, a financial services firm that issues loans to those that own alternative, illiquid assets, only contributed to its problems.

In 2018, GWG stopped buying life insurance policies and began selling L Bonds backed by Beneficent ownership units. The latter used the proceeds from those sales to invest in alternative assets. Investors are saying that they were never fully apprised of these developments.

Contact:

If you purchased GWG L Bonds in recent years with Emerson Equity or another brokerage firm, please contact our GWG Holdings investment attorneys today for your free case consultation.

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SOURCE Shepherd Smith Edwards & Kantas LLP