GWG Holdings, a financial services company, operates as a provider of liquidity solutions and services for the owners of illiquid investments. The Company offers a broad range of trust products, investment advisory services, liquidity solutions, and custody and administration services to mid-to-high-net worth individuals. GWG Holdings serves clients in the United States.
In 2021, GWG’s independent auditor resigned and the Securities and Exchange Commission SEC began investigating its financial statements. However, GWG did not tell investors about these issues until April 2022 – after the firm filed for bankruptcy.
The bankruptcy filing sparked lawsuits from angry investors. Some of the investors had invested their retirement savings in GWG’s alternative and illiquid bonds called “L Bonds,” which were backed by life settlements. L Bonds pooled money from investors to purchase life insurance policies in the secondary market and then used payouts from those policies when people died to pay them back. Unfortunately, the risky investments were not appropriate for retail investors, including many retirees and elderly individuals.
As a result, the Company’s financial performance declined and its L Bonds became illiquid. Investors lost their principal and received less than the promised monthly interest payments and final maturity amount. As a result, GWG Holdings is no longer able to fulfill its obligations to its L Bond investors.
GWG’s bankruptcy filing also created uncertainty for investors in its illiquid alternative investments, which are often sold by brokers-dealers and financial advisors. According to an article in Investment News, Silver Law Group Founder Scott Silver weighed in on a recent FINRA arbitration that awarded nearly $100,000 to a client who bought $80,000 worth of GWG’s illiquid L-Bonds.
In the case, the client purchased the GWG bonds through a broker-dealer called Titan Securities, Inc. The dispute centered around the broker-dealer’s failure to disclose that GWG was facing an SEC investigation and that it was not filing its financial reports on time.
The Trustee has now begun the process of liquidating GWG’s assets and working with the Litigation Trustee to prosecute litigation against those parties that directly or indirectly led to the Company’s downfall. The Trustee will continue to work diligently to recover as much value as possible for the benefit of impacted investors.