Articles Tagged with gwg holdings

Stoltmann Law Offices is representing GWG L-Bond investors from across the country in FINRA arbitration claims against the brokerage firms responsible for soliciting the investors to put their hard-earned money into the speculative bonds offered by GWG Capital.

There are thousands of investors in the GWG-Bonds and very few have actually filed FINRA claims.  Many are waiting on the sidelines to see what happens with the ongoing Chapter 11 process while others are relying on information being peddled by the brokers and firms who sold them GWG, who continue to (mis)represent the alleged value of GWG Holdings, promising a full return of investor funds.  This is false and at this point, its fraud.

Let’s examine some of the representations advisors and their firms continue to make to their clients. First, GWG has an interest in FOXO Technologies (symbol FOXO). In September, FOXO went public in a SPAC deal and its stock is down over 90% since it hit the market.  FOXO has a current market capitalization of only $38.6 million, making it a micro-cap penny stock. Any representations that L-Bond investors will be saved as a result of any FOXO interest is clearly false as the stock continues to crater.

The securities attorneys at Chicago-based Stoltmann Law Offices are representing investors in FINRA arbitration actions against multiple brokerage firms that recommended GWG-L-bonds to their clients. Our investigation into GWG, which includes monitoring and being involved in the Chapter 11 bankruptcy, is focused on two issues: First, GWG L-Bonds were speculative, high risk, unrated debt instruments. One of the biggest issues with this bond program is, the bondholders were subordinate to hundreds of millions of dollars other debt.  The debt owed by GWG in these bonds are not the first priority to be paid back by the company on the “capital stack”.  These were very high risk investments, so unless that was made clear to you by your financial advisor, you may have a claim to pursue for misrepresentations and commissions and for recommending an unsuitable investment.  Either of these are actionable.

The other main issue here from the brokerage firm perspective is the failure to perform reasonable due diligence. Although 160 brokerage firms sold GWG Financial, this is actually a super-minority, roughly 5%, of all brokerage firms nationwide. In reality, very few firms approved GWG for sale to their customers.  GWG was allowed to borrow up to 90% of its listed assets. Its assets are almost all illiquid and subject to “fair valuation” which is an extremely dangerous financial situation for investors.  Big firms like Merrill Lynch and Morgan Stanley don’t go anywhere near unrated speculative bonds like this. But a lot of firms do because GWG paid brokers massive 8% commissions to sell these bonds which were the financial life-blood of GWG.  Even through the US government began investigating GWG in October 2020, and brokerage firms still continued to sell them.  As early as march 2020, GWG was reporting publicly about “several material weaknesses” with respect to the company’s accounting processes.  By 2020, there were more Red Flags about GWG than a Soviet May-Day parade and yet brokerage firms continues to sell it, and one reportedly BOOSTED sales.

It was reported this week that Centaurus Financial, with 640 brokers nationwide, actually increased the amount individual investors could invest in GWG from $100,000, to $150,000. Brokers went on the sales push to recommend their clients increase their investment in the GWG L-Bonds in April 2020, after GWG reported material issues with accounting and after it entered into a highly questionable transaction with the Beneficient Company, alleged now to have been securities fraud.

Chicago-based Stoltmann Law Offices is representing clients who’ve suffered losses from investing in GWG Holdings bonds.  The news has been bitter for GWG investors this year. GWG (Nasdaq: GWGH) stated on April 6 that it received a letter from the Nasdaq Stock Market notifying the company that it was not in compliance “as a result of not having timely filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.”

In January, the company stated that it would miss nearly $14 million in interest payments on “L” Bonds that were due on January, 15, 2022. GWG is a financial services firm based in Dallas that owns and manages a diverse portfolio of life insurance policies that included some $1.8 billion in face value of life insurance policy benefits.

GWG has told investors it isn’t paying interest on its bonds — or dividends — on its Redeemable Preferred Stock and Series 2 Redeemable Preferred Stock. L Bonds are unrated bonds that based on life insurance settlements. They are created to purchase life insurance contracts and have yielded between 1% and 5% of the market price as broker commissions. The company has been selling high-yield bonds since 2012. The 2020 offering of $2 billion in L Bonds of a value of $2 billion was sold by advisors from 127 firms.

Stoltmann Law Offices is representing investors whose brokers or financial advisors sold them GWG Holdings, Inc. L Bonds. Brokerage firms, including but not limited to Aegis Capital, recommended this speculative private placement to clients, collecting up to 5% of the Bond’s market price as their commission. The L Bonds are high-yield life insurance bonds used to finance the purchase of life insurance on the secondary market. Any type of investment in the secondary life insurance market is an extremely risky investment, and these bonds certainly were not suitable for many, if any, clients. Given recent events, default on the L Bonds seems to be imminent, and may leave investors with a total loss of their investments. These investment losses may be recoverable from the financial advisors who sold the L Bonds as a result of their due diligence failures, and for making unsuitable recommendations.

According to their filings with the Securities and Exchange Commission (“SEC”), GWG has halted the sale of the L Bonds and failed to issue $10.35 million of interest payments and $3.25 million of principal payments to L Bond investors by the January 15, 2022 due date. If these payments are not made by the end of the 30-day grace period on February 14, 2022, GWG will be in default. Pursuant to GWG’s Amended and Restated Indenture, when in default, noteholders or trustees holding at least 25% of the aggregate outstanding principal amount of the L Bonds may elect to accelerate liquidation of the Bonds.

By halting the sale of the L Bonds, GWG has also cut-off a main source of its liquidity. If the “interest” payments that GWG was making on the L Bonds was actually paid from incoming principal from new investors, rather than revenue, then GWG will not be able to make interest payments any time soon. GWG is underwater based on its balance sheets.  While it has close to $1 billion in tangible assets, GWG has over $1.5 billion in outstanding L Bonds, plus $327.7 million in senior credit facilities. Based on these numbers, if liquidation of the L Bonds is accelerated, GWG will not have enough in assets to cover the liquidation.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from investing in GWG Holdings L-Bonds. The company stated recently that it would miss nearly $14 million in interest payments on “L” Bonds that were due on January, 15, 2022. On Monday (Feb. 14), GWG issued a statement that “We know many [investors] will have questions, and we don’t yet have all the answers, but we are committed to finding the best path forward,” according to Investment News.

In the interim, GWG isn’t paying interest on its bonds — or dividends — on its Redeemable Preferred Stock and Series 2 Redeemable Preferred Stock. L Bonds are unrated bonds that are based on life insurance settlements. They are created to purchase life insurance contracts and have yielded between 1% and 5% of the market price as broker commissions. Yet the maturity of GWG Bonds has ranged from 2 to 7 years, yielding 5.5% to 8.5%.

“A reader of GWG’s communication would gather that they had no intention of making the missed payments even within the grace period of 30 days,” noted alphabetastock.com. “This could lead some holders of the L Bonds and trustees to accelerate their bonds, which would make them due immediately, and as a result, payable, further stretching the company’s resources. There is growing concern that this acceleration could create a ‘run’ on the company that could be financially ruinous not only for GWG but its L Bondholders as well.”

Stoltmann Law Offices is investigating Garry Savage, a registered broker with Wall Street Securities in Huron, Ohio. Mr. Savage was previously registered with Royal Alliance Associates in New York, New York from October 1993 until March 1995 and Securities America in Lavista, Nebraska from March 1995 until August 1995. He is currently registered with Wall Street Securities and has been since August 1995. The Financial Industry Regulatory Authority (FINRA) brought a complaint against Savage and Wall Street in 2013, alleging that between January 2012 and November 2012, Mr. Savage sold $2 million of Renewable Secured Debentures via GWG Holdings, Inc. and made approximately $95,000 from those sales. FINRA alleged that he made unsuitable recommendations to nine customers in the course of 19 separate sales totaling more than $2 million of Debentures. These are high-risk, illiquid investments, not suitable for all investors. FINRA also alleged that he oversaw 12 registered representatives across six branch locations and failed to establish and maintain a supervisory system that ensure his brokers were compliant with all applicable industry rules and regulations. These are all against securities laws.

Please call our securities law offices in Chicago today if you suffered losses with Garry Savage. His firm, Wall Street Strategies, may be responsible for losses because of its failure to reasonably supervise him. The call is free with no obligation. We take cases on a contingency fee basis. 312-332-4200.

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