The Securities and Exchange Commission (SEC) is investigating GWG Holdings $2 billion L Bond, according to GWG’s annual filing in November, 2021 for the previous year.
GWG Holdings (GWGH) is a Texas-based financial services firm that offers alternative investments, life insurance, and other services.
The company has missed important SEC filing deadlines, and has not yet filed financial statements for the first 3 quarters of 2021, causing Nasdaq to threaten to delist the company.
The company had previously declined to comment when asked about an SEC investigation. Now they confirm that the commission is conducting an investigation and has subpoenaed information related to the company’s products, L Bonds, and accounting.
GWG stated that it is currently not able to raise money, is losing money, and that the SEC’s investigation is delaying its business plans and could damage its reputation and result in fines and legal costs.
A report from an external auditor said that GWG’s internal controls over its financial reporting showed insufficient accounting policies and led to restating financial statements.
GWG says it is cooperating with the investigation and that the SEC also asked about their financial reporting consolidation with Beneficient Company Group LP.
GWG Partners With, Then Separates From Beneficient
In 2018, a transaction was completed that launched a partnership between GWG Holdings and Beneficient Group LP, a financial services company. GWG reportedly received a $193 million loan from Beneficient and 86% of the common partnership units of the company. In 2020, GWG announced that they were going to “expand their strategic partnership” with Beneficient.
In November, 2021, Beneficient (a/k/a Ben for short) announced that it had amended its organizational documents to eliminate GWG’s rights to appoint directors to their board, making them an independent company. GWG remains a passive limited partner.
About L Bonds
L Bonds are a type of bond sold by life insurance companies that are supposed to finance the purchase of life insurance policies from policyholders. A GWG prospectus for L Bonds offered 5.5% to 8.5% interest rates, which is higher than most publicly-traded bonds.
Though the appeal of L Bonds is their higher yield, they involve significant risk and speculation. The bonds are illiquid, so investors do not have an easy way to sell their position for cash. Also, because they are not publicly traded, they do not have the same regulatory oversight as publicly-traded bonds, and investors have less information on the value of the investment.
In April, 2021 GWG paused the sale of L Bonds, which may be in financial trouble
Contact Silver Law Group
If you invested in L Bonds offered by GWG Holdings, please contact Silver Law Group for a no-cost consultation at firstname.lastname@example.org or toll free at (800) 975-4345.
Silver Law Group has extensive experienced representing investors in securities and investment fraud cases nationwide. Scott Silver, Silver Law Group’s managing partner, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice. Most cases are handled on a contingency fee basis, meaning nothing is owed to the firm unless and until we recover your money for you.