Around 40 broker-dealers reportedly sold nearly $1.6 billion in GWG L-Bonds, before GWG Holdings filed for bankruptcy in 2022. Since then, investors who own L-Bonds in their portfolios, have been trying to understand their options for recovery. Today, we will discuss the latest developments on L-Bonds and try to answer questions you may have about GWG Holdings, L-Bonds, the brokers who sold them, and losses you may have suffered.
Why Are Alternative Investments like L-Bonds Unsuitable for Many Investors?
A FINRA arbitration decision recently stated that L-Bonds may not have been suitable for any investor. This is because the L-Bonds were illiquid, speculative, and unsecured and were being used to finance operating losses and the acquisition of illiquid assets by GWG Holdings. Moreover, the assets of GWG Holdings were in heavily indebted subsidiaries and the L-Bonds were only secured by stock in those subsidiaries which had little value because the assets of those subsidiaries were used as collateral for other loans. Brokers have also been suspended by the SEC and FINRA for recommending GWG Holdings L-Bonds.
What are GWG L-Bonds?
GWG Holdings financed its operations through the issuance of speculative, effectively unsecured bonds. These bonds financed the illiquid assets that GWG was purchasing-life insurance policies. GWG Holdings had losses in each year of existence and issued L-Bonds in increasingly large amounts to finance its operating losses. This effectively amounted to a Ponzi scheme as earlier L-Bond holders were paid off with proceeds from the subsequent sale of L-Bonds.
Why did GWG file bankruptcy and why are your L-Bonds of little or no value?
Because there were no operating profits for GWG Holdings and it financed its operations with the L-Bonds, a downward spiral was inevitable. Moreover, GWG Holdings had other secured borrowing which meant that any bankruptcy proceeds would go to pay priority secured creditors which did not include L-Bonds holders.
How Can I Recover Losses from Unsuitable Investments like L-Bonds?
Your broker has a duty to only make suitable recommendations. This duty cannot be waived. To recommend L-Bonds, the broker would have to have ignored or disregarded red flag warnings in the bond prospectus which included that the L-Bonds were illiquid, speculative, and effectively unsecured. This is true even if you agreed to the recommendation or “wanted” the transactions. These are defenses that your broker will tell you to prevent you from suing the Broker. Do not be fooled or intimidated as securities laws enable you to recover even if you agreed to or wanted the transaction.
What if I have other gains?
Generally, losses for unsuitable recommendations are recoverable even if you have gains in other securities. Brokers are not permitted to offset gains with unsuitable losses.
When can I file to recover my L-Bonds losses?
At most, an investor has six years from the purchase date of an investment to be eligible to file for recovery. In the case of L-Bonds, many L-Bonds investors purchased several L-Bonds over the years, sometimes having an earlier one redeemed only to purchase a new L-Bond. We will evaluate your claim, and it is likely that you may file for recovery based on the last purchase date for those bonds purchased. In any event, time is of the essence. Contact the Mark Tepper law firm now for a no-cost evaluation.
Is more than 10% of your account invested in GWG L-Bonds and other non-traded securities?
Most brokerage firms limit the amount of non-traded securities like GWG L-Bonds that can be held in your account. If more than 10% is invested in these non-traded securities, you may have a claim for recovery of any losses.
How can I recover losses in these unsuitable, non-traded and/or speculative investments?
The Mark Tepper law firm will review your claim at no cost and evaluate its potential value. We take cases on a contingent fee basis – which means no legal fees to us unless you recover.
The Mark Tepper law firm can help you recover your losses
The Mark Tepper law firm has a proven track record of success in cases of recovery for investors, including cases involving brokerage firms that failed to supervise unauthorized trading, excessive trading, and unsuitable recommendations in customer accounts.
How to contact an attorney who will fight for the recovery of your losses?
If you have an investment account that has GWG Holdings L-Bonds and/or other non-traded or speculative securities and have questions about unsuitable trading and/or losses in your account, you can get a FREE evaluation of your claim by emailing attorney Mark Tepper at askmark@marktepper.com, or telephone him at 954-704-2310.