DALLAS, Texas – Formerly a beacon for people who sought to convert their life insurance policies into immediate cash, GWG Holdings is now in bankruptcy with no way of repaying investors. The company’s troubles began in 2021 when its independent auditor resigned, a clear warning sign that the firm was not keeping accurate financial records. Then, GWG Holdings was threatened with a delisting from the NASDAQ and it was forced to suspend sales of its L bonds, further raising concerns about the company’s finances.
In April 2022, GWG Holdings filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas. The company also declared that it would not be able to make its L bond interest payments unless it could raise more capital. The company’s bankruptcy filing is just the latest chapter in a financial nightmare that has left many investors out millions of dollars.
The company’s struggles are not surprising, considering the speculative nature of its remaining assets and the fact that GWG has been siphoning funds from the company to pay other creditors. The company’s debts total approximately $1.6 billion, and the fact that it has no cash flow means it will be unable to repay its creditors anytime soon.
Investors who bought GWG’s L bonds through a brokerage firm may be able to recover some of their losses from the broker-dealer or financial advisor who sold them. Broker-dealers and financial advisors are required to ensure that any recommended investments meet the customer’s investment objectives, that adequate due diligence has been performed, and that all risks of an investment are clearly disclosed. Failure to do so can result in FINRA arbitration claims for customers who lose money on those investments.
In a recent article in Investment News, Silver Law Group founder Scott Silver discussed a FINRA arbitration case involving broker-dealer Greenberg Financial Group and a financial advisor who both ignored red flags when they sold their client GWG’s illiquid L bonds. The arbitrator awarded nearly $100,000 to the investor, who purchased $80,000 worth of GWG L bonds in 2018.
Investors in illiquid investments such as GWG’s L bonds need to be sure that their broker or financial advisor has adequately explained the risks of the investment to them. If you or someone you know lost money investing in GWG L bonds, contact us today to learn about your options for recovery through a FINRA arbitration claim. It is important to act early as there are time limits on filing a claim. Contact our office to schedule a free consultation with an experienced attorney. We represent clients nationwide.