In December of 2021 the SEC had announced its investigation into GWG Holdings $2 billion L Bond. An external auditor’s report found that GWG’s internal controls over its financial reporting showed “insufficient accounting policies and led to restating financial statements.”
On February 14, 2022, GWG Holdings, Inc. officially defaulted on their interest and maturity payments to L bond investors, ending the 30 day grace period they had received to make these payments. Over $300 million in further bond maturities will occur in upcoming months. While its principal assets seem to be generating cash flows, it seems those funds are not being used to make payments to bondholders.
What Are L Bonds?
L Bonds are a type of bond sold by life insurance companies that are supposed to finance the purchase of life insurance policies from policyholders, as a secondary market for life insurance.. An initial GWG Holdings prospectus for L Bonds offered between 5.5% to 8.5% interest rates, which is notably a higher projection than most publicly-traded bonds.
Though the appeal of L Bonds is this supposed higher yield, they come with significant risk and speculation. The bonds are illiquid and are not publicly traded, lacking the same regulatory oversight as publicly-traded bonds. Because of this, investors have less information on the value of the investment and are not able to turn their investment into cash and get out of it entirely.
What Happens Now?
GWG Holdings’ inaction has left many investors confused about what might happen next, unsure if they will ever receive payment. These individuals placed their confidence and retirement savings in the hands of brokers, who convinced them the bonds were well-secured.
Investors should feel confident that their securities broker is performing their due diligence on any investment that is recommended to them. It is brokers’ fiduciary duty to ensure that all recommendations are suitable for the investor. This means that recommendations should be consistent 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 they can and should be held liable for investment losses.
Oakes & Fosher Can Help
Many investors are unaware of the legal recourse available to them after losing money due to securities broker fraud and/or negligence. The truth is that investors who have lost money due to this fraud or negligence may actually be entitled to damages.
Oakes & Fosher dedicates its entire legal practice to helping investors across the nation. If you, or someone you know, have lost money because of investments in GWG Holdings L Bonds, please contact Oakes & Fosher for a free and private consultation. Oakes & Fosher handles cases on a contingency basis, which means there are no fees charged unless we collect for you.