Securities Arbitration Lawyers BlogAre Investors Locked In The Waterford Funds Sponsored By Griffin Capital?
Griffin Capital is an investment management firm that specializes in alternative investments. Based in Los Angeles and founded in 1995, the company owns, manages, sponsors, or co-sponsors programs worth more than $20 billion in assets. It has more than 200,000 investors.
One of those asset categories is called “life settlements.” Last year, Griffin Capital announced that they were winding down the Morpheus Life Fund LLC, halting redemptions on June 30th and September 30th. Investors were urged to transfer their funds to two other funds, HASelect-Waterford LLC and HASelect-Waterford Fund International SP funds.
On December 28, company sent letters to investors notifying them that they are now winding down the two Waterford funds. In the process, they are “gating” investor funds and restricting requests for redemption, leaving investors without access to their money.
Life Settlements – Morpheus Life Fund
If you’ve never heard of a “life settlement,” you’re not alone. Considered an “alternative” type of investment, it’s the sale of a life insurance policy by the policyholder for an amount over the payout amount to an investor. Once the policyholder sells their policy for a one-time payment, the purchaser then owns the policy, pays on it, and as the beneficiary, collects the payout when the original policyholder dies.
These policies are sold on the open market rather than surrendered by the policyholder, which would leave them with far less money. The amount they receive by selling is less than the full amount of the policy, but still more than the surrender value. The benefit amount of the policy is generally above $50,000.
For the seller, it means a cash infusion that they may not be able to access otherwise. For the investor, this investment is not nearly as vulnerable to market fluctuations and economic cycles. However, the return on investment depends on the death of the seller—which is unpredictable and may be a very long time. But it does have the potential for high yield returns, and an estimated $240 to $600 billion of policy benefits.
Most people sell their life insurance policies for many reasons, but most are seniors. Life insurance becomes more expensive with passing years, and many can’t afford to keep up with the premiums. Rather than let the policies lapse and lose their money, many policyholders opt to sell to recover some of their value. These investments are sometimes called “senior settlements,” since they are most frequently seniors who are selling their policies for cash.
Fund Gating
This is a tool designed to limit investor redemptions from a fund to preserve capital. The side effect can be similar to a bank run, when account holders withdraw all their money at once. Many investors may decide to liquidate and get out of a fund at the same time. It creates a domino effect, and severely depletes assets. For funds like these, it could drop the liquidity too low to meet obligations to investors.
Griffin Capital decided to wind down Morpheus, and notified investors in June of 2021. In the original letter to investors, they claimed that the wind down was due to their inability to find any additional subadvisors that the one they already had, Chris Erwin of Global Capital Consulting, LLC. The company encouraged them to transfer their funds into the Waterford funds, calling it “award-winning.” Unfortunately, that didn’t last long.
In a confidential letter to investors on December 28, 2021, Griffin indicated that they are suspending redemptions in the Waterford funds and will cease taking new subscriptions. Meanwhile, investors are still unable to access their money.
The company estimates that it will make final distributions in 48 months (4 years.) But with this information being made public, that period could be another one or two years, or even longer. That leaves investors waiting as long as six years or more before they receive any of their money.
Many investors have also contacted the SEC for assistance.
Legal Cases Relating To The Life Settlement Funds
According to news reports, on December 15, 2021, Griffin sent another letter to investors notifying them of two legal decisions facing Chris Erwin.
- The State Bar Court of California issued a disciplinary action against him on August 2nd. He was charged with five counts of misconduct. The case involved a client whom he believed owed him commissions of $130,000 for referrals of policy conversions.
- A California appeals court on August 6th upheld a lower court ruling that sided with two investment firms. Erwin was the firm’s life settlement broker, along with his sub-agent. Both failed to notify their investors about the premiums they owed on a $4 million policy. The policy eventually lapsed.
The company stated that the cases are in the process of being appealed. Therefore, they should not impact the Waterford funds, since it is Erwin’s company that is contracted as a sub-advisor, and they have many years of experience in life settlements. Griffin must approve all decisions made by Erwin’s company for selling policies.
Did You Invest In Life Settlements With Griffin Capital?
Silver Law Group is a leader in Life Settlement litigation. Our attorney’s are currently representing Plaintiffs in multiple cases involving life settlement funds and similar offerings including cases against Seeman Holtz and GWG. Our practical experience in securities and investment fraud cases makes us uniquely qualified to help investors identify wrongdoing and recover improper losses.
Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.