Class Action Securities Lawsuit Filed Against GWG Holdings Over L Bond Losses

Texas-Based GWG Holdings and its Directors Are Defendants in Class-Action Lawsuit

Two investors seeking class-action status have filed a lawsuit against GWG Holdings, Inc. (NASDAQ: GWGH). They are accusing the Texas-based alternative asset manager and investor of life settlements, as well as its directors, of making misrepresentations and omissions in offering documents of its L Bonds. 

GWGH sold more than $350M of these high-yield bonds between August 2020 and April 2021, when sales were discontinued due to liquidity problems. The company also failed to submit its 2020 yearly report in a timely manner. In February 2022, GWG Holdings defaulted on $3.25M of principal payments plus $10.35M of interest owed to L Bond investors. 

Our GWG L Bond lawyers represent investors whose financial advisors sold these high-yield bonds. Today, please contact us at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com). 

Investors Allege Enrichment & Misappropriation by Board Chair Brad Heppner 

The plaintiffs contend that GWG Holding’s registration with the US Securities and Exchange Commission (SEC) in 2020 for its L Bond offering had inaccurate or incomplete information. Allegedly the registration failed to offer accurate information about how the firm planned to use net proceeds. 

They claim that contrary to what was stated in the registration statement, L Bond proceeds were not used to enhance the value of the company’s assets. Nor were their proceeds used to give investors a more comprehensive range of products and services, increase liquidity or work capital, or fulfill regulatory requirements. 

The plaintiffs allege that starting In 2018, GWG Board Chairman Brad K. Heppner set up the L Bonds distribution platform to enrich himself, leading to GWGH turning insolvent and investors’ L Bonds becoming practically worthless. 

The Risks of L Bonds 

This specialty, unrated high-yield bond and private placement offering was created and issued by GWGH. Broker-dealers sold L Bonds to investors, including retail customers for whom this type of illiquid, alternative investment was unsuitable and too risky. These firms and their brokers earned high commissions from the transactions. 

According to the class action securities lawsuit, GWG Holdings first used money from L Bond sales to invest in life insurance policies. However, in 2018, the company stopped investing in these policies. Instead, it began investing in The Beneficient Company Group, LP, founded and controlled by Heppner. 

The complaint alleges that in 2018 and 2019, GWGH moved over $350M to The Beneficient Company Group and its subsidiaries and issued $366M in L Bonds to one of the subsidiaries. This led to GWGH consolidating ownership and control of The Beneficient Life Group. 

On November 29, 2021, The Beneficient Life Group announced a separation from GWG Holdings to become a “fully independent company.” GWGH, however, was to remain a “passive limited partner.”

Meanwhile, between 2018 and 2020, L Bond sales rose by about 65%. Yet, investors were allegedly not fully apprised of where all of the money raised was going, including that $153M purportedly was used to repay a Heppner-controlled entity.

L Bond Investors Sustain Huge Losses

GWG L Bond investors have sustained significant losses. Aside from the default on the millions owed and the redemptions suspended, investors are now left with these alternative investments that cannot be sold and are not paying them the income promised. The company is under investigation in a non-public, fact finding probe involving SEC enforcement. 

GWG Holding’s auditor recently stepped down, and the company remains behind on its regulatory filings. Also, the alternative asset firm has reported investment losses of almost $530M in recent years.

Seasoned GWG L Bond Investor Lawyers

Brokers from Emerson Equity, Centaurus Financial, Aegis Capital, and many other firms sold L Bonds from GWG Holdings to their customers. These customers included retirees, elderly investors, inexperienced investors, conservative investors, and other retail clients. Please call SSEK Law Firm today at (800) 259-9010 to request your free case assessment with one of our skilled L Bond attorneys.

We cannot stress how important it is to file your own Financial Industry Regulatory Authority (FINRA) arbitration claim rather than joining class action litigation. Submitting an individual case while being represented by a knowledgeable GWG L Bond law firm will maximize your chances for full financial recovery.