Investor Alert: GWG L Bonds
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GWG L Bonds Investigation
Are you concerned about your investment in GWG L Bonds? If so, the securities attorneys at The White Law Group may be able to help you by filing a FINRA Arbitration claim against the brokerage firm that sold you the investment.
GWG Holdings finances its portfolio of life insurance assets through the sale of alternative investment products, according to its website. Although these products are touted as offering potentially higher yields than other investment assets that are correlated with the traditional stock and bond markets, they may come at a much greater risk to investors.
According to the GWG L Bond prospectus, “An investment in the L Bonds involves significant risks, including the risk of losing your entire investment, and may be considered speculative. Importantly, we maintain a senior borrowing arrangement that subordinates the right to payment on, and shared collateral securing, the L Bonds to our senior secured lender.”
An L bond is an alternative investment vehicle that attempts to provide a high yield for a lender in exchange for bearing the risk that an insurance policy premium or benefits may not be paid. An L bond is an unrated life insurance bond that is used to finance the purchase and premium payments of life insurance settlement contracts purchased in the secondary market, according to Investopedia.
Updated September 8, 2021 – GWG Suspends Offering, Fails to File Financial Reports
On August 1, 2021, GWG announced that its board of directors determined that certain previously issued financial statements including its annual report for the year ended 2019, and the quarterly reports for the first three quarters of 2020 “should no longer be relied upon.” GWG reported that the Board’s determination was based upon the consultation process with the SEC’s Office of the Chief Accountant (SEC OCA). GWGH noted that following the consultation with the SEC OCA it will consolidate the trusts, that hold secondary alternative assets that GWG has provided loan financing to as part of its core strategy, into its financial statements.
Further, GWG has not filed its annual report for the year ending December 31, 2020, and has not filed its form 10-Q for the quarter ending March 31, 2021. GWG reported that it is working to complete restatements regarding the financial statements in its 2019 annual report and its quarterly reports for the first three quarters of 2020. GWG notes that it “is unable at this point to estimate when those restatements will be complete.”
GWG further noted that “these restatements do not arise from or cause any negative changes in the Company’s operations, the underlying economics attributable to the Company or its subsidiaries, the terms of the Company’s existing assets, or its expected prospects for future business.” GWG says that it continues to make all required payments under its L Bonds and preferred equity and is working on financing options to further supplement its cash position.
After failing to timely file its 2020 annual report, GWG suspended its offering of L Bonds. Further, several members of the Board of Directors reportedly resigned in the second quarter of 2021.
Updated July 1, 2020 – GWG Holdings, Inc. Reports Results For Q1 2020
According to a press release on May 15, 2020, the company noted that despite the uncertainty surrounding the novel coronavirus pandemic (COVID-19), the company continues to raise capital, pay and receive interest income and dividends, receive insurance policy benefits, and otherwise meet its ongoing operating obligations.
On May 15, 2020, Beneficient Company Group and its lender reportedly signed a term sheet to amend its senior credit and subordinated credit agreements, according to SEC filings. Among other changes, the amendment would extend the maturity date of both loans to April 10, 2021, and provides for them to be transferred to GWGH or a subsidiary upon issuance of Ben’s trust company charters by the Texas Department of Banking. The amendments set forth in the term sheet are subject to, among other things, the negotiation and execution of definitive agreements governing the amendments and the satisfaction of closing conditions.
On March 6, 2020, Beneficient Company Group reportedly submitted revised trust charter applications to the Texas Department of Banking which the Department is actively reviewing and considering. In the interim, Ben has closed a limited number of transactions to date, but intends to significantly expand its operations if and when the trust charters are issued.
According to first quarter 2020 “Financial and Operating Highlights,” the company reported first quarter 2020 net loss of $49.4 million, compared to a net loss of $18.9 million in the first quarter of 2019.
GWGH’s investment in Ben was accounted for as an equity method investment prior to the change-of-control on December 31, 2019, and the first quarter of 2020 includes the consolidated results of Ben for the first time, according to the filings.
The company further noted that it has continued its shift in focus away from new life insurance policy acquisitions and towards its investment in Beneficient Company Group, while managing its existing life insurance policy portfolio. As part of that strategic shift, the Company has ended its Life Care Exchange program for purchasing policies.
Updated February 1, 2020 – GWG Holdings, Inc.’s “Strategic Partnership”
GWG Holdings, Inc. (Nasdaq: GWGH) and The Beneficient Company Group, L.P. (BEN) reportedly announced an agreement between Beneficient Company Group and Jon Sabes, Chairman and CEO of GWG, and Steven Sabes, a director of GWG, pursuant to which GWG and BEN will “significantly expand their strategic partnership.”
According to a press release, through a series of transactions, “the expanded partnership enhances and accelerates one of the most innovative service and liquidity providers in the rapidly growing alternative asset industry.”
GWG Holdings, Inc. also announced that there reportedly would be a delay in the filing of its annual report for 2018. The delay was reportedly due to accounting for certain assets and liabilities related to the reverse merger transaction with The Beneficient Group, L.P. and the completion of an evaluation of fair value on its life insurance policies.
Beneficient Company Group and GWG reportedly launched their “strategic relationship” through a transaction that was completed on December 28, 2018. As a result of the prior Transaction, GWG apparently holds approximately 86% of common partnership units of BEN and a $193 million commercial loan receivable from BEN. In addition, GWG issued approximately 27 million shares of its common stock and issued $367 million in L Bonds to certain trusts) that sold the BEN common partnership units to GWG. As a result of the prior transaction and the transaction announced In April, BEN reportedly will own approximately 7.6%, and the Seller Trusts will own approximately 79% and the voting control, of GWG’s outstanding common stock.
On December 31, 2019 the company filed an amendment related to the transaction in connection with the Debt Coverage Ratio in the Indenture.
Investigating Potential Lawsuits in GWG L Bonds
The White Law Group is investigating the liability that FINRA registered brokerage firms may have for improperly selling high-risk investments, like GWG L Bonds, to investors. Brokerage firms are required by the Financial Industry Regulatory Authority (FINRA) to disclose all the risks of an investment, prior to making recommendations to an individual investor. Recommendations should only be made if the investment is suitable for an individual investor given their age, investment objections, investment experience and risk tolerance.
Brokerage firms that do not perform adequate due diligence on an investment and/or make unsuitable recommendations can be held accountable for investment losses through FINRA Dispute Resolution.
If you concerned about your investment in GWG L Bonds, the securities attorneys at The White Law Group may be able to help you. Please call the offices at 888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois.
For more information on The White Law Group and its representation of investors in FINRA arbitration claims, visit https://www.whitesecuritieslaw.com.
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