If you invested in GWG Holdings L Bonds and experienced significant losses following the company’s 2022 bankruptcy filing, you’re not alone. Thousands of retail investors—many of them retirees seeking stable income—have seen their GWG L Bond investments lose substantial value, with suspended interest payments, halted redemptions, and illiquid positions that cannot be easily sold or redeemed.
Haselkorn & Thibaut, P.A., a national investor-rights law firm, is conducting a comprehensive investigation into GWG Holdings-related losses and evaluating potential claims on behalf of investors who purchased GWG L Bonds through brokerage firms and financial advisors. This guide offers an in-depth examination of GWG Holdings, the GWG lawsuit landscape, the issues with GWG L Bonds, and the legal options available to investors seeking recovery.
Key Takeaways
Table of Contents
- GWG Holdings issued high-yield L Bonds that were sold primarily through independent broker-dealers to retail investors.
- In April 2022, GWG Holdings filed for Chapter 11 bankruptcy, leading to suspended interest payments, halted redemptions, and significant investor losses.
- Many GWG L Bond investors have questioned whether the risks were adequately disclosed and whether the investments were suitable for their financial profiles.
- Investors may have claims against the broker-dealers and financial advisors who recommended GWG L Bonds, regardless of the issuer’s bankruptcy status.
- Multiple GWG lawsuit proceedings are ongoing, including bondholder litigation related to the bankruptcy process.
- Timely action is critical due to FINRA filing deadlines and statutes of limitations.
What Are GWG Holdings L Bonds?
GWG Holdings, Inc. was a financial services company that financed its operations in part by issuing alternative investments known as “L Bonds.” These bonds were marketed as income-producing securities offering yields significantly higher than traditional fixed-income products like corporate bonds or certificates of deposit.
GWG L Bonds were sold primarily through independent broker-dealers to retail investors, many of whom were retirees or individuals seeking regular income. The bonds were structured as unsecured debt obligations of GWG Holdings, meaning they were not backed by collateral and carried credit risk tied directly to the financial health of the issuer.
Key Characteristics of GWG L Bonds
- High Yields: GWG L Bonds offered interest rates that were attractive compared to traditional fixed-income products, which appealed to income-focused investors.
- Illiquidity: Unlike publicly traded bonds, GWG L Bonds were illiquid and could not be easily sold on a secondary market. Investors seeking to exit their positions had to rely on GWG’s redemption policies.
- Redemption Restrictions: GWG Holdings maintained policies that limited redemptions, and the company reserved the right to suspend or delay redemptions under certain circumstances.
- Credit Risk: As unsecured obligations, GWG L Bonds carried significant credit risk. If GWG Holdings encountered financial difficulties, bondholders faced the risk of payment suspensions or principal loss.
- Complex Structure: The underlying business model of GWG Holdings involved purchasing life insurance policies in the secondary market, a strategy that carried operational, regulatory, and valuation risks that may not have been fully understood by retail investors.
The GWG Holdings Bankruptcy: What Happened?
In April 2022, GWG Holdings filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas. The filing came after the company faced mounting financial pressures, regulatory scrutiny, and challenges related to its business model.
Timeline of Key Events
- Pre-Bankruptcy Warning Signs: Prior to the bankruptcy filing, GWG Holdings faced delays in financial reporting, questions about asset valuations, and concerns about the sustainability of its business model.
- April 2022: GWG Holdings filed for Chapter 11 bankruptcy protection, triggering immediate consequences for L Bond investors.
- Payment Suspensions: Following the bankruptcy filing, GWG suspended interest payments to L Bond investors, cutting off the income stream that many investors relied upon.
- Redemption Halts: The company halted all redemptions, leaving investors with no ability to exit their positions or access their principal.
- Wind-Down Trust: As part of the bankruptcy proceedings, many L Bond investors received interests in a wind-down trust, which have reportedly lost significant value—some estimates suggest losses of 90% or more compared to original principal investments.
Impact on GWG L Bond Investors
The GWG Holdings bankruptcy has had devastating financial consequences for many investors:
- Loss of Income: Retirees and income-focused investors who relied on regular interest payments from GWG L Bonds suddenly found themselves without that income stream.
- Illiquidity: Investors who might have needed access to their capital for emergencies, healthcare costs, or living expenses discovered they had no way to liquidate their positions.
- Principal Losses: The value of GWG L Bond investments declined sharply, with many investors facing near-total losses of their original principal.
- Emotional and Financial Stress: Beyond the financial impact, many investors have experienced significant stress, particularly those who invested substantial portions of their retirement savings in GWG L Bonds.
The GWG Lawsuit Landscape: Ongoing Litigation
Multiple legal proceedings related to GWG Holdings are currently ongoing, reflecting the complexity of the situation and the various parties involved.
Bondholder Litigation
Public court records reflect continued litigation activity involving GWG Holdings bondholders. Recent filings in the Southern District of Texas include adversarial proceedings related to the bankruptcy case, with bondholders raising questions about various aspects of the bankruptcy process and the conduct of parties involved in case administration and mediation.
These proceedings are distinct from individual investor claims against selling broker-dealers, but they provide important context for understanding the broader GWG lawsuit landscape.
Investor Claims Against Broker-Dealers
Separately from bankruptcy-related litigation, individual investors have pursued and continue to pursue claims against the brokerage firms and financial advisors who recommended and sold GWG L Bonds. These claims typically proceed through FINRA arbitration or, in some cases, through court litigation.
The focus of these investor claims is not on GWG Holdings’ bankruptcy itself, but rather on whether the broker-dealers and advisors who sold GWG L Bonds complied with their obligations under securities laws and industry regulations.
Potential Claims Against Broker-Dealers Who Sold GWG L Bonds
Investors who purchased GWG L Bonds may have claims against the brokerage firms and financial advisors who recommended these investments, regardless of the outcome of GWG Holdings’ bankruptcy. These claims center on whether the recommendation and sale process complied with industry standards.
Suitability Violations
One of the most common bases for GWG lawsuit claims involves suitability. Under FINRA rules and securities laws, broker-dealers and their registered representatives must have a reasonable basis to believe that a recommended investment is suitable for a particular customer based on that customer’s investment profile.
For GWG L Bonds, suitability questions often include:
- Age and Time Horizon: Were GWG L Bonds recommended to elderly investors who had limited time horizons and might need access to their capital for healthcare or living expenses?
- Risk Tolerance: Were these high-risk, illiquid investments recommended to conservative investors who specifically stated they wanted safe, stable investments?
- Liquidity Needs: Were GWG L Bonds sold to investors who indicated they might need access to their funds, despite the bonds’ illiquid nature and redemption restrictions?
- Investment Objectives: Did the recommendation align with the investor’s stated objectives, such as capital preservation, income generation, or growth?
Many GWG L Bond investors report that they were conservative, risk-averse individuals seeking stable income, yet they were sold complex, illiquid alternative investments that carried significant credit and liquidity risks.
Inadequate Risk Disclosure
Even if an investment might theoretically be suitable for some investors, broker-dealers have an obligation to provide balanced, accurate information about both the potential benefits and the risks.
For GWG L Bonds, disclosure issues often include:
- Liquidity Risks: Were investors clearly informed that GWG L Bonds were illiquid, could not be easily sold, and that redemptions were subject to company policies and potential suspensions?
- Credit Risks: Were investors adequately informed about the credit risk associated with GWG Holdings as an issuer, including the possibility of payment suspensions or principal loss if the company encountered financial difficulties?
- Business Model Risks: Were investors provided with clear explanations of GWG Holdings’ business model, including the risks associated with purchasing life insurance policies in the secondary market?
- Regulatory Risks: Were investors informed about potential regulatory scrutiny or challenges facing GWG Holdings?
Many investors report that marketing materials and advisor presentations emphasized the attractive yields of GWG L Bonds while minimizing or obscuring the significant risks.
Over-Concentration
Proper portfolio diversification is a fundamental principle of investment management. Concentrating too much of a portfolio in a single investment or a single type of investment can expose investors to excessive risk.
In GWG lawsuit cases, concentration issues often arise when:
- Investors had substantial portions of their portfolios allocated to GWG L Bonds
- Investors held multiple tranches or series of GWG L Bonds, creating concentration in a single issuer
- Investors’ portfolios were heavily weighted toward illiquid alternative investments generally, with GWG L Bonds representing a significant component
Over-concentration in GWG L Bonds meant that when the company filed for bankruptcy, investors faced catastrophic losses rather than manageable portfolio adjustments.
Due Diligence Failures
Broker-dealers have an obligation to conduct reasonable due diligence on investment products before offering them to clients. This due diligence should include investigating the issuer’s financial condition, business model, management, regulatory status, and the specific risks associated with the investment.
Questions in GWG lawsuit cases often include:
- Did the broker-dealer conduct adequate due diligence on GWG Holdings before offering L Bonds to clients?
- Did the firm investigate warning signs about GWG Holdings’ financial condition or business model?
- Did the firm have adequate information to understand the risks of the investment?
- Did the firm update its due diligence as new information became available?
Supervisory Failures
Brokerage firms have supervisory obligations that extend beyond individual broker conduct. Firms must have adequate systems in place to supervise their registered representatives and ensure compliance with securities laws and regulations.
In GWG lawsuit cases, supervisory issues may include:
- Whether the firm had adequate procedures for reviewing and approving alternative investment sales
- Whether representatives received proper training on GWG L Bonds’ features, risks, and suitability considerations
- Whether the firm monitored for concentration issues or patterns of unsuitable sales
- Whether the firm had adequate systems to ensure proper disclosures were provided to investors
Legal Pathways for GWG L Bond Investor Recovery
Investors who experienced losses in GWG L Bonds have several potential avenues for pursuing recovery against the broker-dealers and financial advisors who recommended these investments.
FINRA Arbitration
The Financial Industry Regulatory Authority (FINRA) operates an arbitration forum specifically designed for resolving disputes between investors and brokerage firms. FINRA arbitration offers several advantages for GWG lawsuit claims:
Benefits of FINRA Arbitration:
- Industry Expertise: Arbitration panels typically include individuals with securities industry knowledge who understand complex investment products and industry standards.
- Streamlined Process: Arbitration generally proceeds more quickly than court litigation, with focused discovery and efficient hearing procedures.
- Confidentiality: Arbitration proceedings are confidential, protecting investor privacy during what can be a stressful process.
- Finality: Arbitration awards are binding and enforceable, with very limited grounds for appeal.
- Cost Management: The streamlined nature of arbitration can help control legal costs compared to extended court litigation.
FINRA Arbitration Process for GWG Lawsuit Claims:
- Filing: The investor files a Statement of Claim outlining the allegations and damages.
- Response: The brokerage firm files an Answer responding to the allegations.
- Discovery: The parties exchange documents and may conduct depositions of key witnesses.
- Hearing: The case is presented to an arbitration panel, typically consisting of one to three arbitrators.
- Award: The panel issues a written decision determining liability and damages.
Court Litigation
In certain circumstances, pursuing a GWG lawsuit through court litigation may be appropriate. Court litigation may be preferable when:
- The case involves complex legal issues that benefit from broader discovery rights
- Multiple investors suffered similar harm and class action procedures may be available
- The facts support claims for punitive damages or other remedies not typically available in arbitration
- Strategic considerations favor the court forum
Damages in GWG Lawsuit Cases
Calculating damages in GWG L Bond cases requires careful analysis of multiple components:
Principal Losses: The original amount invested that cannot be recovered, accounting for any distributions received (which may have been returns of capital rather than investment gains).
Lost Income: Expected interest payments that were suspended, calculated based on the bonds’ stated interest rates and the period of suspension.
Opportunity Costs: Perhaps most significantly, damages include the returns the investor could have earned if their money had been invested in suitable alternatives that matched their actual risk tolerance and investment objectives. This calculation often represents the largest component of damages.
Consequential Damages: In some cases, investors may be entitled to compensation for additional losses suffered as a result of the unsuitable investment, such as having to liquidate other investments at unfavorable times, incurring debt to meet living expenses, or other financial hardships directly caused by the GWG L Bond losses.
Why Timing Matters for GWG Lawsuit Claims
If you experienced losses in GWG L Bonds, several factors make prompt action important:
FINRA Eligibility Rules
FINRA arbitration claims generally must be filed within six years of the occurrence or event giving rise to the claim. For GWG L Bond investments, determining the relevant date can be complex and may depend on when the investment was purchased, when problems became apparent, and other factors.
Waiting too long can result in claims being time-barred, preventing recovery even if the underlying conduct violated industry standards.
Statutes of Limitations
Various statutes of limitations may apply to GWG lawsuit claims depending on the legal theories asserted and the jurisdiction. These time limits vary but generally require action within a specified number of years.
Evidence Preservation
Important evidence can be lost over time:
- Brokerage firms may change record-keeping systems or purge older documents
- Brokers and supervisors may change jobs, retire, or become difficult to locate
- Memories fade, making witness testimony less reliable
- Communications and documents may be deleted or lost
Early engagement helps ensure that crucial evidence is preserved and available to support your claim.
Strategic Considerations
Early GWG lawsuit cases may achieve better results because:
- Opposing parties haven’t yet developed standardized defenses
- Settlement leverage may be stronger before firms have invested heavily in defending multiple cases
- Firms may be more motivated to resolve early cases to avoid setting adverse precedents
What to Expect in a GWG Lawsuit Case Evaluation
When you contact Haselkorn & Thibaut about potential GWG L Bond claims, the firm conducts a comprehensive evaluation designed to assess your situation and explain your options.
Initial Consultation
The process begins with a detailed discussion of:
- Your investment experience and financial situation at the time you purchased GWG L Bonds
- Your investment objectives, risk tolerance, and liquidity needs
- How GWG L Bonds were presented to you and what you were told about the risks
- The specific circumstances of the recommendation and sale
- The losses you’ve experienced and the impact on your financial situation
Document Review
The firm will review key documents related to your GWG L Bond investment, including:
- Account statements showing the purchase and any subsequent activity
- Trade confirmations for GWG L Bond purchases
- Offering documents, prospectuses, or other disclosure materials
- Marketing materials or presentations you received
- Correspondence with your broker or financial advisor
- Account opening documents showing your stated investment objectives and risk tolerance
- Any communications about the investment or GWG Holdings’ financial condition
Suitability Analysis
Attorneys will assess whether GWG L Bonds were suitable for your specific situation by comparing:
- The characteristics of GWG L Bonds (high-risk, illiquid, complex, credit-sensitive)
- Your investment profile (age, objectives, risk tolerance, time horizon, liquidity needs, financial situation)
- Industry standards for recommending alternative investments
- Whether adequate disclosures were provided about the risks
Case Strategy Discussion
The firm will outline:
- The strengths and potential challenges of your case
- Available forums (FINRA arbitration vs. court litigation)
- The procedural steps involved in pursuing a claim
- Expected timelines for resolution
- Potential damages methodologies and realistic recovery expectations
- The contingency fee arrangement (no attorney’s fees unless there is a recovery)
Haselkorn & Thibaut’s Experience With GWG Lawsuit and Alternative Investment Cases
Haselkorn & Thibaut has extensive experience representing investors in disputes involving alternative investments, including cases similar to GWG lawsuit matters.
Track Record
The firm has successfully represented investors in cases involving:
- Failed Private Placements: Cases where private placement sponsors misrepresented business models, misused investor funds, or failed to disclose material conflicts of interest
- Non-Traded REITs: Disputes involving real estate investment trusts that suspended distributions, experienced significant value declines, or were sold to unsuitable investors
- Business Development Companies (BDCs): Cases involving BDCs with undisclosed fee arrangements, conflicts of interest, or unsuitable sales to conservative investors
- Oil and Gas Partnerships: Matters involving energy investments marketed with unrealistic return projections or undisclosed risks
- Credit-Linked Products: Disputes involving complex credit instruments sold to investors who didn’t understand the risks
Approach
The firm’s approach to GWG lawsuit cases includes:
- Thorough Investigation: Comprehensive review of all available documents and evidence
- Expert Analysis: Working with financial industry experts who can provide independent analysis of suitability, industry standards, and damages
- Strategic Planning: Developing case strategies tailored to each client’s specific circumstances and objectives
- Aggressive Representation: Pursuing maximum recovery through settlement negotiations or arbitration/trial when necessary
- Client Communication: Keeping clients informed throughout the process with regular updates and clear explanations
Contingency Fee Structure
Haselkorn & Thibaut handles GWG lawsuit cases on a contingency fee basis, meaning:
- Clients pay no attorney’s fees unless there is a financial recovery
- The firm advances the costs of investigation and case preparation
- Fees are calculated as a percentage of any recovery obtained
- This arrangement aligns the firm’s interests with the client’s interests and ensures access to legal representation regardless of current financial circumstances
