GWG Bondholder Committee Seeks to Ram Pennies On The Dollar Settlements Through Bankruptcy Process
Published On: December 22, 2022

Stoltmann Law Offices represents approximately 120 investors who were sold GWG L-Bonds by their financial advisors and investment advisors.  Our clients’ cases are filed against the brokerage firms, like Cabot Lodge, Moloney Securities, Centaurus, Center Street Securities, and Newbridge, amongst others, for the damages these recommendations have caused to our clients.  FINRA Arbitration is the dispute resolution forum used by brokerage firms in the United States for handling lawsuits filed by investors.  Stoltmann Law Offices attorneys have about 60 years of collective experience in representing investors in this narrow legal field and have recovered tens of millions of dollars through settlements and arbitration awards for their clients since 2005.

The GWG L-Bond saga continues.  After filing for Chapter 11 bankruptcy protection in April 2022, and defaulting on its L-Bonds many months before that, investors have been filing claims through FINRA to protect their rights.  Many investors remain on the sidelines believing, in many instances because their advisor told them so, that GWG will make investors whole through the Chapter 11 process.  It is highly unlikely the Chapter 11 will make L-Bond investors whole, because their purported “Chapter 11 plan” assumes the company will re-emerge from bankruptcy as a registered Investment Company that will issue L-Bond holders “preferred stock” in the new company.  GWG is facing allegations of securities fraud and it believes the court will bless a plan that involves the company becoming a registered Investment Company under the Investment Company Act of 1940. That is precisely the kind of nonsense GWG has been spouting since it went public in 2014.

As part of the bankruptcy process, a bondholder committee was formed to allegedly protect the rights of L-Bond owner/creditors. That bondholder committee has been able to do extensive discovery, take depositions, and has come to the conclusion that GWG was in fact just a huge Ponzi scheme, as detailed in a recent InvestmentNews article.  What the Bondholder committee wants to do is, bring cases against every brokerage firm en masse that sold L-Bonds to investors.  Those mass-actions will result in nominal cash contributions by the 100 or so brokerage firms that sold L-Bonds, result in a release in whatever claims those brokerage firms may have against GWG, result in a release of claims investors have against the brokerage firms, and would cause the money collected to be sucked into the bankruptcy estate for distribution to creditors.  Just like the rest of the GWG bankruptcy process to date, the only people who make out in situations like this are the lawyers. Routinely, the lawyers in the GWG bankruptcy have had their $1,200 hourly rates blessed by the court and have been paid millions and millions of dollars so far, but they just want more.

L-Bond investors should refuse to participate in any purported claims brought by the bond holder committee for several reasons. First, your individual claim won’t matter there, it will be a mass action that is settled for pennies on the dollar.  Instead, investors should contact an experienced FINRA arbitration attorney and file a claim through FINRA Arbitration to recover their losses.  Second, there are claims to make against individual financial advisors, supervisors, due diligence officers, and compliance officers of these myriad brokerage firms. Third, there are claims to make against the insurance companies that offer insurance coverage to brokerage firms in these circumstances, but who deny coverage based on technicalities.  These claims all should be fully evaluated in order to maximize an L-Bond investor’s potential to recover their losses.

If you invested in L-Bonds and have not secured experienced FINRA Arbitration counsel to prosecute your claims, please contact Stoltmann Law Offices at 312-332-4200 for a free, no obligation initial consultation. Unlike the bond-holder committee lawyers, we represent clients on a pure contingency fee basis, which means we do not get paid a dime unless we recover for you first.

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