National investment fraud lawyers KlaymanToskesis investigating GWG Holdings, Inc. (NASDAQ: GWGH) (“GWG”) (“GWG Holdings L Bonds Investigation”) in light of the company’s recent SEC filing announcing its missed interest and principal payments with respect to its L bonds.
An L bond is a purportedly high-yielding debt instrument created by GWG that financed the purchase of life insurance policies on the secondary market.
GWG Holdings offered the L Bonds with a maturity ranging from 2 to 7 years and paying an interest rate of 5.50% to 8.50%. According to KlaymanToskes, the L Bonds are speculative, high-risk, and illiquid private placement offerings.
According to its recent Form 8-K, GWG failed to make an interest payment of approximately $10.35M and principal payments of approximately $3.25M with respect to its L bonds on January 15, 2022. If GWG fails to make the interest or maturity payments within a 30-day grace period, a default will occur. GWG also has elected to voluntarily suspend its L bonds sales effective January 10, 2022. GWG had previously suspended its L Bond sales during eight months in 2021 due to the late filing of its Annual Report, and it subject to an ongoing, non-public fact-finding investigation by the SEC.
According to securities attorney Lawrence L. Klayman, Esq., “Brokerage firms that recommended GWG Holdings’ L Bonds have a duty to conduct a due diligence review to determine whether the information that it relies upon is credible and whether any further investigation is required. The failure to reasonably conduct due diligence regarding GWG’s L bonds may be a cause of action in a Financial Industry Regulatory Authority (“FINRA”) securities arbitration claim.”
GWG Holdings, Inc. is a financial service holding company that is focused on the alternative asset industry through its liquidity products and related services for the owners of illiquid alternative investments.
According to Reuters, GWG Holdings through its subsidiary, GWG Life, LLC, conducts its life insurance secondary market business. The Company’s segments include Secondary Life Insurance and Investment in Beneficient.
On December 31, 2021, Grant Thornton LLP (“Grant Thornton”), the independent registered public accounting firm of GWG Holdings, Inc. (the “Company”), notified GWG Holdings that it will not stand for reappointment as the Company’s independent registered public accounting firm.
GWG previously stated in its 10-K filing about doubt about its ability to continue as a going concern. Specifically, as stated on the Form 10-K:
“Our current inability to raise capital, recurring losses from operations, negative cash flows from operations, delays in executing our business plans, and potential negative implications of the ongoing SEC non-public, fact-finding investigation raise substantial doubt regarding our ability to continue as a going concern. The report from our independent registered public accounting firm for the year ended December 31, 2020, includes an explanatory paragraph stating that these factors raise substantial doubt about our ability to continue as a going concern.“
Further, in its December 2021 Press Release, GWG elaborated on its insufficient internal controls:
“The internal controls disclosure indicated that management had determined that GWGH’s internal controls were not sufficient to ensure amounts recorded and disclosed were fairly stated in accordance with GAAP. GWGH has increased the company’s accounting and financial reporting resources and has expended, and will continue to expend, a substantial amount of effort and resources to remediate and improve the internal controls.”
On October 6, 2020, GWG Holdings received a subpoena to produce documents from the Chicago office of the SEC’s Division of Enforcement, informing the Company of the existence of a non-public, fact-finding investigation into GWG Holdings.
Since the initial subpoena, GWG Holdings has received subsequent subpoenas from the SEC for additional information. The requested information from the SEC has primarily related to GWG Holdings’ investment products, including its L Bonds, as well as various accounting matters. among them, the consolidation for financial reporting purposes of Beneficient by GWG Holdings, goodwill valuation, and the accounting related to the ExAlt Trusts, related party transactions, life insurance policies, and the calculation of the debt-coverage ratio.
Until receipt of the initial subpoena on October 6, 2020, GWG Holdings had no previous communication with the SEC related to these issues and was unaware of this investigation.
The Company has previously stated it is cooperating with the SEC in this investigation.
Investors with losses in excess of $250,000 in GWG’s L Bonds, and those who have information relating to the handling of their accounts at full-service brokerage firms regarding GWG’s L bonds, are encouraged to contact Lawrence L. Klayman, Esq. at (561) 542-5131, and download our Special Investor Report
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. KlaymanToskes has recovered more than $228 million for investors in FINRA arbitrations. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.