GWG Holdings Investors May Have Claims Against Brokers For Unsuitable Recommendations

When GWG Holdings suspended payments to bondholders in January 2022 and set itself up for a February default, it was no surprise to many analysts who had viewed the company as a risky investment. In fact, the risk posed by GWGH and its L Bonds had been well-known since shortly after the product’s inception, and the company’s failure to comply with disclosure requirements prompted regulators to begin investigating it in early 2021.

The company’s bankruptcy filing in April of this year further revealed the extent of its troubled business model and underlying financials. According to the company’s Chapter 11 bankruptcy filing, investing in GWG Holdings owes its creditors more than $500 million and only has $29 million in cash and liquid assets. The Company’s primary asset — life insurance policies — are not enough to cover the debt, and its only other significant asset is equity stakes in two startups that were controlled by the company’s principals, Brad Heppner and the Brothers Sabes.

The bankruptcy filing also detailed the company’s attempt to conceal the extent of its problems by using proceeds from the sale of its L Bonds to fund the Heppner and Brothers Sabes’ personal business ventures. Ultimately, this strategy led to GWG’s bankruptcy and the Company’s refusal to repay L Bondholders.

Investors who bought GWG’s speculative and illiquid L Bonds may have claims against their brokers for unsuitable recommendations. Financial advisors have a legal and regulatory obligation to only recommend investments that are suitable for their clients’ age, risk tolerance, net worth, and investment objectives. Additionally, brokerage firms have a duty to supervise their financial advisors’ sales practices and deals with clients.

In the course of our firm’s GWG Holdings investigation, we have uncovered evidence that Emerson Equity, one of the largest brokerage firms to sell GWG’s L Bonds, failed to perform adequate due diligence on the bonds before recommending them to investors. We have also found that the company made material misrepresentations and omissions in its sales materials.

We have been retained by a large number of GWG bond investors on a contingency fee basis to file arbitration claims against the brokerage firms that recommended these ill-conceived investments to them. If you have purchased the GWG Holdings L Bonds and would like to discuss your options, please contact us. We are here to help!