Earlier this week, GWG Holdings Inc., an alternative asset manager that sold life-insurance bonds to individual investors, filed for bankruptcy. The company had created GWG L Bonds, which pooled money from bond investors to purchase life-insurance policies on the secondary market. The goal of the financial instruments was to use the money from the policy payouts when people die. Instead of a safe investment, these bonds are highly risky and unsellable.
Bond buyers who purchased the financial products from broker-dealers will be represented by Haselkorn & Thibaut’s experienced GWG Holdings L Bonds lawyers. For a free GWG Investor Guide and confidential consultation, investors who purchased L bonds can contact us online or by dialing toll-free 1-888-902-6872.
Investing in GWG L Bonds
Investing in GWG L bonds is risky, but it can be beneficial for those who understand the risks involved. The company behind the GWG L bonds has missed several payments and is exploring options to raise capital and restrict L Bonds. If it fails to do so, it could even file for bankruptcy. Investing in GWG L bonds is not a bad idea if you are willing to take a small amount of risk, and you could see a nice profit at the end of it.
Unfortunately, GWG has suspended sales of its L Bonds and will not resume until at least 2021. Because the GWG L bonds rely on annual financial reports filed with the SEC, it is not expected to resume the sale of these securities until at least 2021. Further, the company has delayed its deadline to file Annual Report on Form 10-K with the SEC. As such, investors who bought GWG L bonds should contact an attorney immediately.
High-risk investment
While the current market for GWG L Bonds has seen a surge in prices in recent months, this investment is a risky alternative. GWG Holdings, which issued the bonds, purportedly bought life insurance policies on the secondary market. The company promised investors that it would pay interest on their investments. Since GWG issued the bonds at pennies on the dollar, these investments are considered high-risk junk bonds. Moreover, the securities and exchange commission and FINRA are investigating brokerage firms that sold these securities.
The securities regulator has launched an investigation into the high-risk L Bonds. The SEC’s investigation uncovered evidence of a shady sales practice by GWG, which has resulted in hundreds of lawsuits. According to the SEC’s investigation, the firm failed to properly disclose the risks associated with these securities to investors. It is now investigating the broker’s role in the investors’ losses.
Poorly secured
Investors in GWG Holdings, Inc.’s poorly secured L Bonds have raised concerns that GWG may be headed for a bank run. While the company may have changed its business model as a result of the Beneficient Co. merger, it still has yet to file its 2020 annual report. Despite the delay, GWG has temporarily suspended the sale of L Bonds to meet maturities. However, it remains unclear if the company is planning to liquidate its bonds.
Many investors have lost money after purchasing these GWG L bonds. Brokerages who sold them to investors received 0.75 percent to 5 percent commissions and additional compensation of up to eight percent of the gross proceeds. While brokerages should have disclosed the high risk of L bonds, many investors did not understand it and invested their life savings into these securities. On April 20, 2022, GWG Holdings filed for bankruptcy. The sale of these bonds was suspended for 8 months but resumed in December. In January 2021, the company hired restructuring advisers.
Unsellable
After years of promises of high interest dividends, investors bought GWG L Bonds and lost a large portion of their money. Unfortunately, the bonds were poorly secured, unlisted, and auto-renewed, making them unsellable once purchased. The bonds also had a high risk of default, and brokers may have misrepresented the risks in order to push investors to purchase them. While these bonds may be an excellent investment, investors should be aware of the risks before purchasing them.
The first sign of trouble was when GWG Holdings ceased selling L Bonds. The company failed to meet several deadlines, including an annual report, and resigned its independent auditor. Sales of L Bonds resumed in December 2021 and continued through January 2022. However, the company then filed a form 8-K with the SEC, indicating that it was no longer able to make dividend payments on the L Bonds. In August 2021, it hired a restructuring advisor to help the company restructure. The company will be required to file an annual 10-K report with the SEC by March 31, 2022.
Lack of liquidity
Several investors are concerned that the company may fail to meet its obligations and face a run on the bank. GWG Holdings Inc. filed its 10-K with the Securities and Exchange Commission on January 18th, citing a lack of liquidity in its GWG L Bonds. The company stated that its timely filing is jeopardized by a 30-day grace period, which did not appear appropriate. The lack of liquidity in GWG L bonds raises several concerns for investors.
Since January 15, 2022, GWG Holdings Inc. has failed to make all interest and principal payments due on the L Bonds. It has until February 14, 2022, to make these payments before the debt becomes due and in default. After that, the bonds will be considered to be in an event of default and GWG will seek to restructure the company’s debt obligations. The New York securities arbitration law firm is currently evaluating claims from L Bond holders who may have been left holding illiquid securities.