GWG L Bonds were high-yield, speculative securities tied to life insurance policies and private placements, sold by various brokerage firms, including Emerson Equity (managing broker-dealer) and Western International Securities. Marketed as alternative investments offering higher yields than traditional fixed income, these bonds carried significant risks: illiquidity, lack of transparency, complex valuation, and dependence on asset sales at uncertain fair market value. They were presented as offering guaranteed returns of principal plus interest, which was misleading according to various investigations.
GWG Holdings Inc issued roughly $1.6 billion of these bonds through a large network of independent contractor broker-dealers and other brokerage firms. The goal was to generate returns from life settlements—purchasing life insurance policies on the secondary market, paying premiums until maturity, and collecting death benefits.
GWG Holdings pooled money from bond investors to purchase life insurance policies on the secondary market to repay investors. In practice, many bond investors suffered significant losses as GWG’s finances deteriorated and the company entered bankruptcy proceedings. GWG Holdings, Inc. filed for Chapter 11 bankruptcy proceedings in April 2022.
Risks Associated with GWG Holdings L Bonds
Table of Contents
- Illiquidity and redemption costs: There was no secondary market for L Bonds, leaving investors with limited liquidity. Early redemptions could require a significant redemption fee, trapping investors until maturity or suspension of payments. L Bonds issued by GWG Holdings had maturities ranging from two to seven years and were illiquid.
- Speculative, unrated securities: GWG L Bonds were unrated and described as speculative, exposing investors to policyholder longevity risks, ongoing premium obligations, and the company’s ability to fund interest and principal payments from operations or new sales. These investments carried a high degree of risk, including the risk of losing the entire investment.
- Complex, model-driven valuations: The bonds’ value depended heavily on assumptions and models about life expectancy, interest-rate sensitivity, and asset monetization. These assumptions proved unreliable, and later asset sales cleared at a significant discount to fair market projections.
- Transparency and due diligence concerns: Investors had limited visibility into financial statements and quarterly reports, making robust due diligence by broker-dealers and financial advisors essential.
Impact on Bond Investors
- Significant losses and financial hardship: Many investors suffered losses when payments were suspended and as bankruptcy cases progressed. For some, retirement savings were impaired, and total loss became a possibility.
- Limited bankruptcy recovery: Bankruptcy court proceedings and the GWG Wind Down Trust have yielded minimal recovery relative to total claims. Asset sales of life settlements and related holdings often occurred at a significant discount to anticipated fair market value. The proposed settlement from GWG’s bankruptcy proceedings may offer investors as little as 3 cents on the dollar for their L Bonds. Beneficient agreed to a $50.5 million settlement to resolve GWG-related claims, pending court approval.
- Need to file your own claim: To pursue meaningful recovery, many investors are filing their own claim via FINRA arbitration against selling firms and advisors, rather than relying solely on bankruptcy distributions.
Key Timeline and Bankruptcy Developments
- 2012–2021: GWG raised ~$1.6B via L bond sales to retail investors.
- Oct 2020: SEC investigation begins; scrutiny of financial statements and quarterly reports. The SEC began a non-public investigation into GWG Holdings in 2020, scrutinizing its L Bonds and accounting practices.
- Jan 15, 2022: GWG suspends interest payments and principal payments on GWG bonds after missing $13.6 million in combined interest and principal payments for its L Bonds.
- Apr 20, 2022: GWG Holdings, Inc. filed for Chapter 11 bankruptcy proceedings.
- Aug 1, 2023: L Bonds canceled; GWG Wind Down Trust (“GWG Wind”) and Litigation Trust established.
- Oct 2023 onward: Asset sales of purported tangible assets, including life settlements, return far less than projected fair market value.
Bottom line: Limited funds remain for distribution to bond investors. Many investors with investment losses are exploring their own claim against broker-dealers. Investors need to retain private counsel to sue the brokerage firm that sold the GWG investments, or they will receive next to nothing in bankruptcy proceedings.
Role of Brokerage Firms
Brokerage firms—including Western International Securities, Emerson Equity, Center Street Securities, Centaurus Financial, Aegis Capital, NI Advisors, and others—played a significant role in distributing GWG L Bonds to retail clients. Many brokerage firms recommended GWG Holdings L Bonds to retail investors despite the product being illiquid and high-risk.
Several brokerage firms were sanctioned for selling GWG’s high-risk L Bonds to less sophisticated and older clients. These firms and their brokers had a legal duty to: Broker-dealers received commissions as high as 8% for selling GWG L Bonds, incentivizing unsuitable recommendations.
- Conduct thorough due diligence on the company, assets, and securities;
- Make only suitable recommendations aligned with each client’s risk tolerance, objectives, liquidity needs, and time horizon;
- Supervise brokers and sales practices under FINRA rules and firm policies;
- Provide balanced disclosures about risks, liquidity, policy surrender limitations, and the speculative nature of the investment.
Where firms failed in due diligence, suitability, or supervision—or where brokers made misstatements or omissions—investors may have viable claims in FINRA arbitration. Brokerage firms across the country may be liable for investment losses their customers suffer under FINRA Rules. Broker-dealers are typically liable for losses that their customers suffer from unsuitable investment recommendations for GWG L Bonds.
GWG L Bond Investors’ Options
- FINRA arbitration (primary path for many): Investors can file claims against brokerage firms and brokers for unsuitable recommendations, misrepresentation or omission, failure to supervise, and Regulation Best Interest violations. Arbitration targets firm assets and insurance rather than the bankrupt issuer and typically proceeds over 12–18 months. Legal claims typically take between 9 to 18 months to resolve and go through a confidentiality process called arbitration.
- Class actions and bankruptcy claims: Some investors may receive distributions via the bankruptcy process or be included in class proceedings; however, these routes often provide limited recovery.
- Work with securities lawyers on a contingency fee basis: Many GWG investors choose counsel who offer a free consultation and contingency representation—no attorney’s fees unless there is a recovery.
Understanding L Bonds
L Bonds are privately issued alternative investments designed as high-yield debt instruments tied to life insurance assets. They are often sold through independent contractor broker-dealers as private placements. Despite higher stated interest, L Bonds can be:
- Illiquid (no reliable secondary market);
- Complex (dependent on life settlements and ongoing premium payments);
- High risk (speculative, unrated, and sensitive to modeling assumptions).
Investors should weigh liquidity needs, risk tolerance, and diversification when considering any private placements and obtain independent advice from a qualified professional.
GWG Holdings Inc and Investor Rights
GWG Holdings Inc had obligations to provide accurate, timely information about its assets and risks. As bankruptcy proceedings unfolded, the gap between projected and realized asset values became evident through asset sales at a significant discount. GWG Holdings was described as relying on new investors’ funds to pay obligations to earlier investors, leading to a model that has been characterized as “Ponzi-like.” Investors maintain rights to:
- Seek recovery for losses caused by unsuitable recommendations or inadequate disclosures;
- Hold brokerage firms accountable for failure to supervise or perform due diligence;
- File their own claim in FINRA arbitration, independent of bankruptcy outcomes.
Calls to Action: Haselkorn & Thibaut — Securities Lawyers for GWG L Bond Investors
- Free, confidential consultation: 1 888-885-7162
- Start your case review: InvestmentFraudLawyers.com
- Fee structure: Contingency fee basis—no attorney’s fees unless there is a recovery
- Who we help: GWG L Bond investors nationwide, including those sold products by Western International Securities, Emerson Equity, Center Street Securities, Centaurus Financial, Aegis Capital, NI Advisors, and other brokerage firms
Haselkorn & Thibaut has experience with GWG claims, broker-dealer liability, and FINRA arbitration. The firm understands how brokerage firms defend these cases and how to build strong investor claims focusing on suitability, due diligence, supervision, and disclosures.
