GWG Board Resigns in Disgrace After Filing False SEC Filings Related to Ben, LP Funding

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 second set of representations revolve around Beneficient, LP – the company that depended on GWG L-Bond investor money to “make deals.” When Beneficient received its much-touted “Kansas charter” in December 2021, it announced closing $357 million in deals on that day in the press release. The recent press release about the SPAC deal that will take Beneficient public disclosed $385 million in deals – only $28 million since the previous information. Beneficient has done almost no business since. Why? Because without the GWG-L bond cash pinata to whack, Beneficient can’t do business – Just like GWG.

It was also reported just this week that GWG’s current board resigned in disgrace after it was discovered that the Board lied in SEC filings about the Beneficient-GWG transactions.  Reportedly, GWG had a special committee designed to examine the Ben, LP – GWG transactions and advised the board against it.  The Board went ahead and did the deal anyways, then lied about it in a Form 8K filing. It is extremely difficult to understand how Beneficient will ever go public through a SPAC deal just like FOXO did.  And if any L-Bond investor believes Beneficient will lead to repayment of the money GWG owed L-Bond investors, I have a bridge to sell you.

It has also been reported through the bankruptcy court, that GWG is nearing a deal to be sold for $630 million to Vida Capital. Minus fees, that will likely net about $600 million to the bankruptcy estate.  With $1.3 billion in L-Bonds outstanding, and after paying about $380 million owed to senior secured creditors, L-Bond investors stand to get less than 20% of their investment back, if this all comes to fruition. From there, GWG will own interests in FOXO, which has lost over 90% of its value in a month, and Beneficient, which as stated above, has done virtually no business since GWG stopped selling L-Bonds.

GWG L bonds were high risk, illiquid, and only suitable for customers with substantial financial resources. Depending on the timing of your investment, the recommendations get worse.  By 2019, GWG had completely changed its business model and was no longer in the life-insurance secondary market business.  However, even as far back as early 2015, there were serious concerns published about GWG’s business model, its accounting methods, and its projections.  Any brokerage firm that sold GWG L-Bonds to clients will have a difficult time justifying the recommendations and an even more difficult time justifying approving the investments for sale on their respective platforms.

Brokerage firms that sold GWG L-Bonds include:

• Moloney Securities
• Emerson Equity
• LifeMark Securities
• Cabot Lodge
• Ausdal Financial
• Coastal Equities
• Western International Securities

For any investor who was sold L-Bonds after June 30, 2020, then there is likely a cognizable claim for violation of Regulation Best Interest, negligence, and violations of your state securities act for making misrepresentations and omissions of material facts in connection with purchase of GWG L-Bonds. For those investors who were sold GWG L-Bonds before June 30, 2020, Regulation Best Interest had yet to be implemented, so claims will fall under the rubric of the FINRA Suitability Rule and its attendant regulatory notices.

According to the Wall Street Journal:

“What many of these retail investors didn’t know was that GWG’s founders and a board director would each use the money to fund and launch their own startup ventures, then move them out of the investors’ reach, according to people familiar with the matter,” The Journal stated. “The roughly 27,000 individuals who bought GWG’s unique debt securities, known as L Bonds, are now facing huge potential losses – for many, their retirement nest eggs.”

It was the Brokerage firms’ job to ensure that investors understood this before soliciting clients to buy, or to roll-over into a new bond.

If you were sold GWG L-Bonds, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!