On February 18, 2022, Girard Sharp filed a class action lawsuit against GWG Holdings, Inc., based on reports that the alternative asset management firm made misleading and false statements. GWG holds a large portfolio of tradable securities and an L Bond, which is supposed to be a high-yield bond. Investors have complained that GWG has not lived up to expectations.
If you have recently lost money with GWG Holdings, you may be interested in filing a lawsuit or FINRA claim. The company is accused of misleading investors and an Independent accounting firm quit shortly afterward. Investors who are conservative should not invest in L Bonds, as they are not suitable for long-term growth. Here’s how you can recover your losses with a GWG Holdings lawsuit.
Matthew Thibaut, Esq., a founding partner of Haselkorn & Thibaut (InvestmentFraudLawyers.com) a nationwide law firm with over 50 years of experience, commented that based on the calls they are getting recently, it appears that some financial advisors that were marketing GWG-related investments (and GWG L Bonds in particular) were not accurately representing the level of risk associated with these high-yield securities.
GWG Investors can call 1-888-902-6872 for a fast, friendly, free consultation that will clarify how GWG’s bankruptcy action impacts their individual investment loss recovery options including securities fraud lawsuits, class actions, or potential FINRA claims.
The securities industry has laws that require brokers and financial advisors to disclose material facts about a company’s stock, and GWG is no different. The brokerage firm failed to tell investors that GWG’s business model would change in 2018, and the firm used the investors’ capital to pay out high distributions to other GWG L bond investors. As a result, investors may not recover their losses for years.
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GWG accused of misleading investors
GWG Holdings, the parent company of Life Epigenetics and GWG Life, is under investigation for potentially misleading investors. The company allegedly misrepresented its financial performance and its ability to meet financial obligations. As a result, its share price plunged 20% intraday on January 27, 2022, causing a sharp decline in TaskUs stock prices. The drop in the stock price was the result of misleading and materially inaccurate statements, as well as failing to disclose material facts. The Company’s 2020 Technical Report contained numerous errors, and GLG’s mineral reserves were overstated by 50%. The company subsequently pledged the entire portfolio as collateral for loans, which became due in April 2021.
GWGH, which is owned by Heppner, and Beneficient are named as defendants in the suit. They are both accused of misleading investors by promoting high-risk investments and deceptively selling them to retail investors. The lawsuit also claims that the company made false representations about the risk of investing in GWG Holdings L bonds, encouraging clients to invest despite the risks. The company is currently under investigation but continues to operate.
Independent accounting firm quit soon after
The independent accounting firm that was hired by GWG Holdings to review its financial statements has reportedly resigned after the company failed to file its annual report for the year ended December 31, 2022. GWG Holdings had missed a number of SEC deadlines and disclosed unreliable financial reports. The company had to halt sales of its L bonds several times, and eventually fell behind on interest payments to investors.
Throughout the past few years, GWG has sold billions of dollars of L Bonds, which is what it relies on to stay afloat. Unfortunately, the company ceased selling L Bonds for most of 2021 and only resumed sales in November after addressing a host of issues with the SEC. However, the firm’s failure to file its annual report promptly led it to suspend its L Bond offering. The firm is currently exploring financing options in order to make up for the loss in sales. The firm also reportedly resigned from the Board of Directors in the second quarter of 2021.
GWG L Bonds were unsuitable for conservative investors
In the course of its business, GWG Holdings sold more than $2 billion worth of L Bonds, each with varying interest rates and maturities. Unlike traditional corporate bonds, which are relatively conservative investments, these securities entail significant risk. In some cases, investors may have grounds for a lawsuit against GWG and broker-dealers or financial advisors who recommended these investments. Alternatively, investors may seek individual arbitration claims against brokerage firms.
The lawsuit argues that Emerson Equity misled investors when they sold GWG Holdings’ L bonds, promoting them as safe investments for retirees and conservative investors. These securities entail substantial risks and should not have been sold to conservative investors. Moreover, Emerson Equity may have had a conflict of interest by recommending GWG Holdings’ L bonds to investors with low-risk tolerance and low investment objectives.
GWG L Bonds were not credit rated
A new lawsuit alleges that GWG Holdings, Inc. failed to properly track investor money. It is important to note that L Bonds are high-yield debt investments. The securities are not credit-rated, and investors can sue the salespeople who marketed them for losses if they don’t meet the investor’s expectations. They may also be entitled to damages, including lost principal and interest, as well as attorneys’ fees.
The original $250 million issues of GWG L Bonds were fully subscribed by December 2014 and the $1 billion issues were completed in January 2015. The bond’s maturity was two to seven years. GWG sold a total of $400 million worth of GWG L Bonds through the independent broker-dealer channel. It has entered into an arrangement with the Depository Trust Company to sell the bond’s proceeds. In January 2016, GWG announced the issuance of over 500 policies and $1.15 billion in insurance assets.