When a bond matures, you are entitled to receive the principal back, along with any accrued interest payments. However, when a company goes bankrupt or defaults on the bonds you hold, you could be left with nothing. This was the situation for many investors who invested in GWG Holdings’ L bonds, which were backed by life settlements. The alternative finance firm reportedly declared bankruptcy in 2022 and stopped paying bondholders. As a result, some people who held the company’s debt instruments are now seeking to recover their losses.
The company’s debt instruments were allegedly sold by brokerage firms that may be liable for their negligent or reckless sales practices. Those who have been harmed by the investment are able to file a civil claim against their broker, the financial advisor at their brokerage firm and/or the company.
Investors were urged to invest in the company’s “L” bonds, which were backed by life settlements. These investments were sold to individuals who wished to obtain the money from their life insurance policies before death or disability, and the companies promised to pay them a high rate of return for their money.
However, the company filed for Chapter 11 protection in 2022 and subsequently missed several interest payments on the debt instruments. The company also alleged that it was running out of cash. As a result, the debt instrument’s value plummeted and unsecured creditors are owed more than $1.6 billion in total.
Creditors argued that Brad Heppner, founder and CEO of GWG Holdings investment fraud, engaged in a Ponzi scheme to steal millions from the firm’s investors. Heppner allegedly misled investors by marketing worthless bonds, engaging in fraudulent insider trading and siphoning off company funds. Creditors filed a motion with the U.S. Bankruptcy Court in Houston alleging that the GWG board ignored warning signs and manipulated company books to make the firm seem profitable.
According to the motion, Heppner was using the company’s assets to fund his own personal and business ventures. The creditors want to take control of the firm and bring it back into a publicly traded status on Nasdaq. The president of Beneficient Company Group, an alternative financing firm with a Kansas charter that replaced GWG last year, said that creditors should support the transition to Nasdaq and avoid litigation that would undermine confidence in the company.
GWG’s balance sheet lists tangible assets of just over $700 million. However, the company’s liabilities far exceed that amount, with the majority being attributed to outstanding L Bonds.
Silver Law Group is investigating the claims of investors who lost money when their brokerage firms and financial advisors unsuitably recommended the illiquid GWG Holdings L Bonds. These investors have a right to sue for negligence, breach of fiduciary duty, and/or violations of FINRA regulations.
A Michigan financial advisor allegedly recommended the L Bonds to an elderly widow, who trusted her Centaurus Financial broker to manage her retirement funds. The septuagenarian invested about $80,000 in GWG Holdings’ illiquid L Bonds in 2018. The bond was to mature in two years and pay 5.5% interest, but the client hasn’t received a payment. The investor claimed that the advisor ignored her red flags, failed to perform due diligence and violated his/her FINRA duties.