Original Post:

GWG Bankruptcy Update (February 11, 2023): GWG Proposes Liquidation in its Amended Reorganization Plan

On February 10, 2023, GWG submitted an Amended Reorganization Plan to the bankruptcy court that would lead GWG to cease all new business operations and establish a Wind Down Trust to liquidate its assets.

The Amended Reorganization Plan was filed as GWG, and other stakeholders are still engaged in a mediation with the Honorable David R. Jones, United States Bankruptcy Judge for the Southern District of Texas. An in-person mediation was held in New York City on January 30, 2023, and January 31, 2023, but it remains ongoing. GWG’s Amended Reorganization Plan may be subsequently amended to reflect any results of the mediation, however below is a high-level summary of the amended plan:

• Under the Amended Reorganization Plan, GWG will no longer continue as a going concern.
• Instead, GWG will cease all new business operations.
• A Wind Down Trust will be established to monetize GWG’s assets.
• GWG has two types of assets (i) portfolio of life insurance policies; (ii) passive non-controlling equity interest in The Beneficient Company Group, L.P. (“Ben LP” and, together with its subsidiaries, “Beneficient”) and FOXO Technologies, Inc. (“FOXO”).
• A Wind Down Trustee will be appointed with the sole authority to make decisions and take action with respect to the Wind Down Trust, including how and when to monetize the equity interests in Beneficient and FOXO.
• Bondholders will exchange their current L Bonds for New Series A Preferred Stock into the restructured GWG. The preferred stock should be freely transferable. The New Series A Preferred Stock shall be entitled to cumulative dividends from April 20, 2022, at the rate of 9% per annum. Pending Cash distributions, such dividends shall be payable in kind. The New Series A Preferred Stock shall be subject to mandatory redemption in five years and may be redeemed at any time without penalty at stated value, plus accrued dividends.
• If the Amended Plan is not confirmed, GWG will likely enter Chapter 7 bankruptcy liquidation.
• Beneficient, its current and former directors and officers (including, without limitation, Bradley K. Heppner, Thomas O. Hicks, Bruce W. Schnitzer, Dennis P. Lockhart, and Peter T. Cangany) do not get released.
• The proposed voting deadline is April 14, 2023, at 4 p.m. CT.

One of the key remaining sticking points among the stakeholders appears to be a standing motion filed by the Official Committee of Bondholders of GWG Holdings Inc. (“Bondholder Committee”) seeking court approval to prosecute causes of action against certain current and/or former directors and officers of GWG Holdings, Inc., individuals, and corporate entities affiliated with or controlled by Brad Heppner, transferees of certain fraudulent transfers, and key broker-dealers who marketed and sold L Bonds.

To read more about the alleged misconduct, please visit our other blog posts:

Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

As GWG Holdings, Inc. continues to navigate the bankruptcy process, with many questions remaining for L bondholders, our law firm remains ready to help GWG L bond investors file meritorious arbitration claims to recover their losses against broker-dealers. We continue to help GWG L Bond investors recover their losses.

Iorio Altamirano LLP (gwglawyer.com), a law firm that represents retail investors, is representing many GWG L Bond investors against brokerage firms across the country to recover investment losses and damages sustained by those firms’ recommendations to invest in GWG L Bonds. Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct by many brokers and broker-dealers across the country.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

However, much of the court filing, including specific allegations of wrongdoing, was filed under seal.

On February 1, 2023, the United States Bankruptcy Court for the Southern District of Texas unsealed several significant court filings, including a draft adversary legal complaint against certain current and/or former directors and officers of GWG Holdings, Inc., individuals, and corporate entities affiliated with or controlled by Brad Heppner, transferees of certain fraudulent transfers, and key broker-dealers who marketed and sold L Bonds.

The unsealed complaint includes claims against the following broker-dealers: Emerson Equity, LLC, Centaurus Financial, Inc, Center Street Securities, Inc., Western International Securities, Inc., NI Advisors, Inc., Moloney Securities Co., Inc., Interest International Equities Corporation, Arete Wealth Management, LLC, Westpark Capital, Inc. Ausdal Financial Partners, Cabot Lodge Securities, LLC, and Portsmouth Financial Services.

The unsealed complaint has revealed the following allegations, which were made after the bondholder committees’ investigation, which included access to information that is not in the public domain:

• Together with other insiders, Brad Heppner was the mastermind behind a Ponzi scheme whereby GWG, in conjunction with its broker-dealer network, sold hundreds of millions worth of L Bonds to retail investors even when it became clear that the only way to repay those investors was to sell yet more L Bonds to more retail investors.
• The engine for this massive Ponzi scheme was not only the large sales force employed by GWG but also a nationwide group of broker-dealers that marketed and sold L Bonds to unsuspecting investors.
• These broker-dealers worked closely with GWG, which paid the broker-dealers hefty commissions to ensure a constant flow of new L Bondholders investing cash into GWG despite GWG’s effective inability to repay them in full.
• Many L Bond holders automatically “renewed” their investment in L Bonds, in which case GWG did not repay the principal to the investor, although it did routinely pay additional commissions to broker-dealers on these renewals. Broker-dealers were incentivized to ensure that no investors ever actually “cashed out” of L Bonds, which allowed them to continue selling new L Bonds and keep new cash coming into GWG, thus perpetuating the Company’s Ponzi scheme.
• In the four years leading up to the Petition Date, the 12 largest broker-dealer recipients of commission payments received at least $42 million from GWG, all while GWG was sliding deeper into insolvency, becoming more reliant on sales of new L Bonds to stay afloat and satisfy maturity and interest payments to existing L Bondholders, and transferring hundreds of millions of dollars in cash to Ben and Ben’s affiliates in exchange for speculative equity interests in these entities.
• The following chart shows the commission received by the 12 largest recipients of commissions from GWG Holdings for brokerage services in the four years leading up to the bankruptcy filing.

• All of the Broker-Dealer Commissions were paid from proceeds of L Bond sales.
• Brad Heppner needed to recruit a steady stream of new investors in order to service GWG’s increasingly large debt obligations. GWG was resigned to paying its debts through additional debt in the form of L Bonds. Unlike a loan, GWG did not need to prove its ability to pay back the L Bonds—it just needed a sales pitch. GWG provided such a pitch to investors and broker-dealers by highlighting GWG’s perfect record of never missing a principal or interest payment on L Bonds. Unbeknownst to investors, however, GWG could only achieve this “perfect” record by aggressively recruiting new investors to pay off the old. GWG had no positive cash flow with which to sustain the Life Portfolio—much less to pay the interest, commissions, and other operational expenses required to sell L Bonds.
• The result was a business model with all the hallmarks of a classic Ponzi scheme. L Bonds purchased by later investors generated artificially high returns for older L Bondholders, whose return on investment was then marketed to encourage more L Bond purchases. The Company continuously sold new L Bonds to repay existing L Bondholders—knowing full well that it would have to sell yet more new L Bonds to repay its increasing debt, and without any reason to expect a turnaround in the Life Portfolio or the value of its investment in Ben to materialize.
• GWG’s relationship with the Broker-Dealers worked as follows. GWG entered into a Dealer Management Agreement with the registered broker-dealer Emerson Equity. As GWG’s “dealer manager,” Emerson Equity agreed to offer and sell L Bonds on a “best-efforts” basis and entered into Soliciting Dealer Agreements with certain other Broker-Dealers that were members of FINRA (the “Selling Group Members”). The Selling Group Members were authorized to sell L Bonds pursuant to their agreements with Emerson Equity. Each Broker-Dealer Defendant was a Seller Group Member.
• GWG Holdings paid the Broker-Dealer Defendants a selling commission ranging from 0.75% to 6% of the principal amount of L Bonds they sold (the exact commission depended on the L Bonds’ maturity date, which ranged from six months to seven years). Each Broker-Dealer Defendant received commission payments directly from GWG Holdings. The Seller Group Members were also entitled to “additional compensation” (also paid by GWG Holdings) of up to 3% of gross offering proceeds as reimbursement for accountable out-of-pocket expenses incurred in offering and selling L Bonds. Given these financial incentives, the Broker-Dealer Defendants were strongly encouraged to maximize L Bond sales and ensure that customers reinvested any proceeds from L Bond maturities into new L Bonds—a key requirement in order to keep the Ponzi scheme going.
• After entering into their respective Soliciting Dealer Agreements with Emerson, Seller Group Members (including the Broker-Dealer Defendants) required regular communications and updates from GWG to stay apprised (and keep their customers, retail investors in L Bonds, apprised) of the Company’s business and its attendant impact on the prospects of L Bonds. This was the responsibility of GWG’s national product sales team (the “GWG Sales Team”), which provided marketing materials and other relevant information about L Bonds (which were prepared and reviewed by GWG) to Seller Group Members.
• The GWG Sales Team comprised “internal wholesalers” and “external wholesalers.” The wholesalers were employees of Ben who assisted GWG and Emerson with the marketing and sale of L Bonds. The wholesalers provided services to GWG and received a base salary from Ben pursuant to the Shared Services Agreement between GWG and Ben. Although they were employees of Ben, the wholesalers registered their FINRA licenses with Emerson, and Emerson held the licenses for and oversaw the national selling activities of the GWG Sales Team. Emerson paid the GWG Sales Team commissions based on the Seller Group Members’ L Bond sales.
• GWG used “internal” and “external” wholesalers for marketing L Bonds to the Seller Group Members. “Internal” wholesalers communicated with registered representatives of the Seller Group Members and booked appointments for “external” wholesalers to meet with these representatives. The external wholesalers then provided these representatives with information regarding L Bonds and established themselves as the representatives’ point of contact within GWG. The registered representatives then placed orders for L Bonds on behalf of their retail investor clients.
• In marketing L Bonds, GWG’s external wholesalers provided marketing materials and made presentations to Seller Group Members and their registered representatives. Wholesalers also spent GWG’s funds entertaining registered representatives with conferences, dinners, and the like.
• Merriah Harkins (“Harkins”), GWG’s Executive Vice President of Retail Capital Markets, oversaw these marketing efforts. Harkins is also a registered representative of Emerson Equity. Harkins and the GWG Sales Team held weekly meetings to discuss L Bond marketing and sales. These weekly meetings were usually attended by internal and external wholesalers, representatives of Emerson, and, on numerous occasions, Evans and Holland. Holland routinely reviewed marketing materials prepared for the Seller Group Members and their registered representatives to verify the propriety of any material disclosures.
• The GWG Board kept close tabs on L Bond sales, including the activity of Broker-Dealers. In addition to overseeing the marketing of L Bonds to Seller Group Members, Harkins, and the GWG Sales Team prepared detailed internal reports regarding L Bond sales and the activity of Broker-Dealers (including but not limited to Seller Group Members). Among other things, these reports showed L Bond sales projections by month, actual sales performance, the number of L Bonds sold by specific Seller Group Members, and the number of L Bonds sold in specific geographic regions, among other things. The GWG Sales Team regularly provided such reports directly to the GWG Board. Harkins and other members of the GWG Sales Team personally appeared at numerous GWG Board meetings to present their reports.
• At the October 29, 2020 meeting of the GWG Board, a “Sales & National Accounts Results” presentation reported 14% growth in L Bond sales year over year, including $42.9 million in sales in September 2020. The presentation also described GWG’s “plan to achieve 2020/2021 goals,” which included a “methodical, numbers-driven expansion plan” to reach a 12-month goal of $750 million in L Bond sales. This plan would involve “measur[ing] activity and sales performance against goals to promote a high level of compliant activity.” The plan also envisioned doubling the number of Broker-Dealer representatives and RIAs to 10,000 by June 30, 2021, and again to 20,000 by September 30, 2021. There is no indication that the GWG Board ever considered hitting the brakes on L Bond sales and Broker-Dealer/RIA activity, given GWG’s obvious insolvency.
• There was significant interest by the GWG Board surrounding the sale of L Bonds. For example, on at least one occasion, in August 2019, the Second Special Committee of the GWG Board asked Harkins what impact the Company’s use of L Bond proceeds to fund transactions with Ben would have on demand for L Bonds.
• In addition to receiving reports from the GWG Sales Team, the GWG Board received direct communications from Emerson Equity on at least one occasion, in February 2021, when Emerson Equity sent a memo regarding its “Analysis of Investors Purchasing GWG L Bonds.” The memo purported “to determine the financial profile of the L Bond investors” and highlighted that the “average investment size in our current series of the L Bond (Series 3) is $46,895.” The memo proceeded to discuss the general marketing and sales practices of Seller Group Members.
• The victims of this scheme (unlike Heppner, who is a reported billionaire) are the approximately 27,000 L Bondholders. These Bondholders are mainly small retail investors, including retired and elderly individuals, with the average individual L Bondholder owning just $45,000 worth of L Bonds. These stakeholders invested their savings with the expectation that the Debtors’ L Bonds were safe investments that would provide periodic interest payments and satisfaction of their principal at maturity—an expectation that was thwarted by Heppner’s scheme and the Defendants’ misconduct. Instead of providing a comfortable income stream for their retirement, the L Bondholders’ investments in GWG became the piggybank for Ben’s speculative business plans and the massive array of trusts and entities under Heppner’s control.
• The financial burden caused by the scheme has fallen solely on the shoulders of the L Bondholders, who find themselves in financial ruin through no fault of their own.

As GWG Holdings, Inc. continues to navigate the bankruptcy process, with many questions remaining for L bondholders, our law firm remains ready to help GWG L bond investors file meritorious arbitration claims to recover their losses against broker-dealers. We continue to help GWG L Bond investors recover their losses.

Iorio Altamirano LLP (gwglawyer.com), a law firm that represents retail investors, is representing many GWG L Bond investors against brokerage firms across the country to recover investment losses and damages sustained by those firms’ recommendations to invest in GWG L Bonds. Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct by many brokers and broker-dealers across the country.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

See Also:

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

GWG Bankruptcy Update: Questions Remain as to When, or If, GWG L Bond Investors Will Receive Future Distributions

GWG L Bond Investor Recovers Losses After Filing a FINRA Arbitration Claim

SEC Finds That Some Broker-Dealers Are Using Outdated, Incomplete, and Inaccurate Risk Disclosures

Brokerage Firm Liability

An L bond is a financial product created by GWG Holdings, Inc. (GWGH). The L Bonds are speculative, high-risk, illiquid, and unrated alternative investment offerings.

Initially, GWG Holdings pooled money from bond investors to purchase life insurance policies on the secondary market, paid the policy premiums, and then collected the death benefit when the insured individual passed away. However, beginning in 2018, GWG Holdings used the investor capital to invest in a new business model, exposing the company to riskier alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. The network of regional broker-dealers who sold L Bonds and shared in the selling commissions included the following firms, as well as other broker-dealers:

• Centaurus Financial, Inc.
• Great Point Capital LLC.
• National Securities Corporation.
• Western International Securities, Inc.
• Aegis Capital, LLC.
• Newbridge Securities Corporation.
• Dempsey Lord Smith, LLC.
• Coastal Equities, Inc.
• International Assets Advisory, LLC.
• Arete Wealth Management, LLC.
• Capital Investment Group, Inc.
• Lifemark Securities, Corp.
• Westpark Capital, Inc.
• Ausdal Financial Partners, Inc.
• American Trust Investment Services, Inc.
• Moloney Securities.
• IFP Securities, LLC.
• Center Street Securities.
• Cabot Lodge Securities LLC.
• Kingswood Capital Partners, LLC.
• American Trust Investment Services, Inc.
• SW Financial.
• Paulson Investment Company LLC.
• Ages Financial Services, LTD.
• Independence Capital Co., Inc.
• Landolt Securities, Inc.
• Intervest International Equities Corporation.
• Titan Securities.
• NI Advisors.
• JRL Capital Corporation.
• The FIG Group, LLC.
• M Stevens Securities, LLC.
• TFS Securities, Inc.
• Integrity Brokerage, LLC.
• American Equity Investment Corporation.
• Portsmouth Financial Services.

Brokerage firms are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. There are serious concerns that some broker-dealers recommended GWG’s L Bonds to customers without first conducting sufficient due diligence on the GWG L bonds or GWGH.

Investors who purchased GWG L Bonds through a financial advisor are encouraged to contact Iorio Altamirano LLP (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

The unsealed complaint has revealed the following allegations, which were made after the bondholder committees reviewed documents and information that are currently not in the public domain:

• Together with other insiders, Brad Heppner was the mastermind behind a Ponzi scheme whereby GWG, in conjunction with its broker-dealer network, sold hundreds of millions worth of L Bonds to retail investors even when it became clear that the only way to repay those investors was to sell yet more L Bonds to more retail investors.
• The proceeds from those L Bond sales were then funneled by GWG to the Beneficient Company Group, LP (“Ben”) (or entities associated with Ben), the unrealized brainchild of Heppner. In large part, Ben used the funds it received from GWG to pay back debt accumulated by a Heppner-affiliated entity long before GWG entered the picture. This scheme was enabled by a complicit and interested board of directors of GWG Holdings (the “GWG Board”). As one former member of the GWG Board testified, Heppner “[c]ontrolled it all. He was the chairman of the board, he picked the board members, he picked the employees. There was no one else. It was him. It was Brad who was in control of all this.”
• Over the course of three years from 2019 through 2021, the Company transferred at least $285 million in the L Bondholders’ investments as well as hundreds of millions of non-cash consideration to Ben, a nascent and perennially unproven company.
• Since April of 2019, Ben—and thus Heppner—directed the appointment of the entire GWG Board. Heppner served as the chair of the GWG Board while also serving as the chair of Ben’s board of directors and CEO of Ben. The GWG Board was therefore a Ben-controlled board and often a conflicted and interested one, approving transactions not for the benefit of GWG but instead for the benefit of Ben and Heppner, at a time when GWG was insolvent.
• GWG—led and controlled by Heppner and Ben—was the epitome of a Ponzi scheme. GWG was required to sell new L Bonds to make principal and interest payments due on older L Bonds because GWG itself was from the outset a failing business, never able to generate revenue even close to sufficient to satisfy its earlier-incurred L Bond obligations.
• The engine for this massive Ponzi scheme was not only the large sales force employed by GWG but also a nationwide group of broker-dealers that marketed and sold L Bonds to unsuspecting investors. These broker-dealers worked closely with GWG, which paid the broker-dealers hefty commissions to ensure a constant flow of new L Bondholders investing cash into GWG despite GWG’s effective inability to repay them in full.
• In the four years leading up to the bankruptcy filing, the 12 largest broker-dealer recipients of commission payments received at least $42 million from GWG, all while GWG was sliding deeper into insolvency, becoming more reliant on sales of new L Bonds to stay afloat and satisfy maturity and interest payments to existing L Bondholders, and transferring hundreds of millions of dollars in cash to Ben and Ben’s affiliates in exchange for speculative equity interests in these entities.
• The constant sale of new L Bonds that GWG could never repay was not concerning to Ben or its insiders because Ben is not a named guarantor of the L Bonds. To Ben, GWG was merely a tool to funnel cash ostensibly to fund Ben’s nascent business, a business that to this day remains aspirational and unrealized. Ben’s rosy projections, none of which have even come close to fruition, were based on events that never occurred and have yet to occur. Importantly, little if any of the cash Ben received from GWG’s L Bond sales went to fund Ben’s nascent business; rather, it was largely used to pay Heppner and certain Heppner-associated entities on account of debt placed on Ben’s books in 2017 that does not appear to represent an actual cash infusion at that time. These actions were taken at the expense of GWG, which was at all relevant times insolvent.
• The victims of this scheme (unlike Heppner, who is a reported billionaire) are the approximately 27,000 L Bondholders. These Bondholders are mainly small retail investors, including retired and elderly individuals, with the average individual L Bondholder owning just $45,000 worth of L Bonds. These stakeholders invested their savings with the expectation that the Debtors’ L Bonds were safe investments that would provide periodic interest payments and satisfaction of their principal at maturity—an expectation that was thwarted by Heppner’s scheme and the Defendants’ misconduct. Instead of providing a comfortable income stream for their retirement, the L Bondholders’ investments in GWG became the piggybank for Ben’s speculative business plans and the massive array of trusts and entities under Heppner’s control.
• The harm resulting from the Challenged Insider Transactions has fallen solely on the shoulders of the L Bondholders, who find themselves in financial ruin through no fault of their own.

Original Post:

“GWG Was a Classic Ponzi Scheme” – Official Committee of Bondholders of GWG Holdings, Inc.

In a court filing made on December 15, 2022, in the Chapter 11 bankruptcy court, the Official Committee of Bondholders of GWG Holdings Inc. (“Bondholder Committee”) alleged that GWG Holdings was a “classic Ponzi scheme.” Specifically, the Bondholder Committee alleged that GWG Holdings was a “multiyear-long fraud orchestrated by Brad Heppner to enrich himself and associated corporate entities by plundering the debtors.” The allegations are significant in that they were made after the bondholder committees’ investigation, which included access to information that is not in the public domain. The following are several key excerpts from the court filing:

• Through no fault of their own, many of these L Bondholders face financial ruin because GWG Holdings, Inc., through a group of select broker-dealers, aggressively and misleadingly marketed and sold L Bonds even after it became clear that its business was failing and the only way to repay those bondholders was to continue to sell yet more L Bonds to existing and additional retail investors. Put simply, GWG was a classic Ponzi scheme.
• Heppner then caused GWG to funnel hundreds of millions to the Beneficient Company Group, LP (“Ben”)—Heppner’s fledgling and nascent company—and Ben’s affiliates, notwithstanding Ben’s persistent failure to develop a viable business plan or come even remotely close to meeting any of its fanciful projections. Ben and Heppner were able to siphon funds out of GWG through a series of deeply conflicted, related-party transactions in which Ben and Heppner stood on both sides via their controlling shareholder position at GWG.
• Following the closing of the auction transaction, GWG’s equity immediately sat behind over $1 billion in debt and preferred equity owned mostly by Heppner, ensuring that no matter what occurred with Ben’s business, Heppner operated without risk.
• GWG gained no meaningful consideration in exchange for the Challenged Insider Transactions, which generally consisted of receiving only equity in Ben that was subordinate to other substantial existing debt and preferred equity. Indeed, GWG did not receive cash repayments for virtually any loans made to Ben, which were eventually almost always converted into capital contributions.
• Notwithstanding the fact that neither GWG nor Ben had a viable business plan, let alone positive cash flow, Heppner, and the associated broker-dealers, were all too happy to keep the scheme alive by continuing to sell L Bonds that had no prospect for repayment. And, in fact, this scheme would likely have continued but for the fact that the Securities and Exchange Commission (“SEC”) commenced an investigation, which ultimately became public. As a result, L Bond sales abruptly stopped. Once GWG could no longer sell new L Bonds to pay off its old L Bond liabilities, the house of cards collapsed and bankruptcy was the only option. GWG filed for chapter 11 protection on April 20, 2022.
• Unsurprisingly, Ben escaped unscathed. Mere months before GWG was forced to file for bankruptcy, Ben “de-coupled” from GWG, becoming an independent company. GWG again received nothing but Ben equity interests that were indisputably exchanged for far less than reasonably equivalent value. The result of this spin-off, like all of Heppner’s actions, was to ensure that Heppner (a purported billionaire) came out ahead and maintained his fortune. Heppner’s gains come at the expense of approximately 27,000 L Bondholders—in many cases “mom and pop” retail investors lured by overconfident and misleading sales pitches by broker-dealers working at the ultimate direction of Heppner. Instead of providing a comfortable income stream for their retirement, the L Bondholders’ investments in GWG became the piggybank for Ben’s speculative business plans and the massive array of trusts and entities under Heppner’s control.

The latest allegations come after GWG Holdings, Inc.’s President and CEO, Mr. Murray Holland, and its CFO and Treasurer, Mr. Timothy Evans, resigned from the company on November 14, 2022. On December 1, 2022, Mr. Holland also resigned from the company’s board of directors. The resignations came after the Investigations Committee, appointed by the bankruptcy court, concluded and alleged that GWG, under the leadership of Mr. Holland and Mr. Evans, submitted a public filing to the Securities and Exchange Commission (SEC) in March 2021 that contained material and false information. Specifically, on March 11, 2021, GWG filed a Form 8-K to report the resignations of three directors. The Form 8-K incorrectly stated that the resignations were not due to any disagreement with the company. The three directors were part of a Special Committee of the Board formed by the board of directors in 2021 to review and approve or reject potential transactions with The Beneficient Company Group, L.P. (“Beneficient”). The three board members had disagreements with GWG management about the funding of Beneficient through preferred shares. The full board of directors dissolved the Special Committee and confirmed the Beneficient investment.

The judge in the bankruptcy proceeding has stated at a recent hearing that he finds the allegations to be colorable. He appears concerned that Brad Heppner, the current CEO and Chairman of the Board for The Beneficient Company Group, was a member of both GWG’s and Beneficient’s board of directors at the time that GWG made the alleged false statement to the SEC and investors. The alleged conduct was repeatedly referred to at the bankruptcy hearing as alleged “criminal or quasi-criminal” conduct.”

In light of the information that has come to light over the past couple of months, GWG L Bond investors have the right to be concerned that GWG’s proposed reorganization plan significantly relies on the success of Beneficient, which is run by Mr. Heppner. Mr. Heppner had a significant role at both GWG and Beneficient; he was a member of both companies’ boards of directors during GWG’s collapse, which led to GWG’s bankruptcy filing. GWG L Bond investors also have the right to be worried that GWG’s proposed reorganization plan contains broad releases and exculpations for many individuals and entities at the heart of alleged wrongdoing.

As GWG Holdings, Inc. continues to navigate the bankruptcy process, with many questions remaining for L bondholders, our law firm remains ready to help GWG L bond investors file meritorious arbitration claims to recover their losses against broker-dealers. We continue to help GWG L Bond investors recover their losses.

Iorio Law PLLC, a law firm that represents retail investors, is representing many GWG L Bond investors against brokerage firms across the country to recover investment losses and damages sustained by those firms’ recommendations to invest in GWG L Bonds. Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct by many brokers and broker-dealers across the country.

Investors who purchased GWG L Bonds through a financial advisor are encouraged to contact Iorio Law PLLC (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

See Also:

Broker-Dealers Sold GWG L Bonds Using Aggressive and Misleading Marketing

GWG Bankruptcy Update: Questions Remain as to When, or If, GWG L Bond Investors Will Receive Future Distributions

GWG L Bond Investor Recovers Losses After Filing a FINRA Arbitration Claim

GWG Could Sell Its Portfolio of Life Insurance Policies for $610 Million, $1 Billion Less Than It Owes to GWG L Bond Investors

Western International Securities Denies Violating Regulation Best Interest in Recommending and Selling Risky and Illiquid GWG L Bonds to Retail Investors

Newbridge Securities Corporation’s Customers Who Purchased GWG L Bonds Are Worried About Their Invested Capital

Law Firm Investigating Dempsey Lord Smith, LLC for the Sale of GWG L Bonds and GPB Capital Funds

Law Firm Investigating National Securities Corporation for the Sale of GWG L Bonds and GPB Capital Funds

Certified Financial Planner Board Suspends Western International Securities Broker Patrick Egan After SEC Charges Related to Selling GWG L Bonds

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

New York Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Great Point Capital LLC

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Aegis Capital Corp

GWG Holdings, Inc. to be Delisted from The Nasdaq Stock Market; Law Firm Investigates Legal Claims for GWG L Bond Investors

GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

On April 20, 2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy, allowing GWG Holdings to propose a reorganization plan. On May 17, 2022, the Nasdaq Stock Market announced that it would delist the common stock of GWG Holdings, Inc.

Many GWG L Bond investors, who have not received interest or maturity payments since January 2022, are skeptical that they will see a return of their invested capital. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

According to the bankruptcy filings, the SEC has been investigating the sales practices related to GWG L Bonds. It has been reported that the SEC’s investigation began in May 2021. We believe that this investigation includes the sales practices of Emerson Equity and its regional broker-dealers, such as Aegis Capital Corp.

Brokerage firms like Aegis Capital Corp. are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About GWG L Bonds

An L bond is a financial product created by GWG. Initially, GWG pooled money from bond investors to purchase life insurance policies on the secondary market, pay the policy premiums, and then collect the death benefit when the insured individual passed away. However, beginning in 2018, GWG used the investor capital to invest in a new business model, exposing the company to much riskier alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

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%.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They are secured by the assets of GWG Holdings and a pledge of all of the common stock by its largest stockholders.

GWG L Bonds were likely not suitable for investors with a low-to-moderate risk tolerance or investors who had liquidity needs.

Investors who purchased GWG L Bonds should contact New York Securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation to review their legal rights.

Aegis Capital Corp. (CRD No. 15007)

Aegis Capital Corp. is an SEC-registered broker-dealer and investment advisor based in New York, NY. The firm, licensed to sell securities in 53 U.S. states and territories, currently has a roster of approximately 325 registered brokers and investment advisors across the country. Aegis Capital Corp., which has been a FINRA member since 1984, provides, among other things, services in connection with wealth management, retirement planning, investment banking, and fixed income trading.

Aegis Capital has repeatedly run afoul of FINRA rules, particularly regarding supervisory violations and excessive trading. According to the firm’s public disclosure report, it has been sanctioned 36 times by regulators for alleged misconduct. The most recent sanction was settled in November 2021. FINRA fined Aegis over $1 million and ordered the firm to pay an additional $1.7 million as restitution after FINRA’s investigation concluded that Aegis failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as it pertains to excessive trading. FINRA alleged that Aegis failed to identify trading in hundreds of customer accounts that were potentially excessive and unsuitable

Additionally, according to a 2017 investigation by Reuters, Aegis Capital hired more brokers with a history of significant “red flag” public disclosures than all but thirty-one other brokerage firms in the country. In 2021 alone, at least seven Aegis Capital registered representatives, or former representatives, were subject to regulatory discipline by FINRA for alleged misconduct and rules violations while employed by Aegis Capital.

Financial institutions like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

See Also:

Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

Aegis Capital Corp. Ordered to Pay Nearly $2.7 Million for Supervisory Failures Related to Rampant Excessive and Unsuitable Trading

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings through Aegis Capital Corp., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

New York securities arbitration law firm Iorio Altamirano LLP is investigating potential legal claims related to investments in L Bonds offered by GWG Holdings, Inc. (GWGH). To read about the investigation’s findings, including a crucial event timeline, please visit our website: www.gwglawyer.com.

GWG Holdings, Inc.’s bankruptcy filing revealed for the first time that the ongoing SEC investigation includes an examination of sales practices of the GWG L Bonds by the brokerage firms that sold the securities, including Emerson Equity and its network of regional broker-dealers. According to the bankruptcy filing, the United States Securities and Exchange Commission issued subpoenas and documents to individual brokerage firms selling GWG L Bonds. As of the bankruptcy filing, GWG Holdings, Inc.’ had over $1.62 billion in outstanding GWG L Bond obligations, mostly owed to retail investors.

See Also:

GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy

GWG Holdings, Inc. Misses Deadline to File Its 2021 Annual Report with the SEC

GWG L Bond Investor Update: GWG Holdings, Inc. Officially Defaults on Its Obligations to L Bond Investors – February 14, 2022

Law Firm Iorio Altamirano LLP Investigating the Sale of GWG L Bonds by Tony Barouti of Emerson Equity LLC

Investors Worried After GWG Holdings Inc.’s “L Bonds” Missed Interest Payments on January 15, 2022

How to Recover Losses or Obtain a Free Consultation

GWG L bond investors are encouraged to immediately contact Iorio Altamirano LLP for a free and confidential consultation and review their legal rights. Iorio Altamirano LLP represents numerous GWG L bond investors in filing lawsuits in the form of securities arbitration claims against firms such as Emerson Equity LLC and Centaurus Financial, Inc. for sales practice violations connected to the solicitation and sale of GWG L Bonds.

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you or a loved one has invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

The complaint alleges that although the prospectus for the June 2020 offering stated that L Bonds were only suitable for customers with “substantial financial resources,” Western International did not set any criteria or thresholds for its customers to invest in L Bonds. Western International Securities also did not restrict the sale of L Bonds to customers with certain risk profiles or investment objectives.

The complaint also alleges that the named brokers misunderstood important issues regarding GWG Holdings, Inc. and the GWG L Bonds, including that GWG significantly changed its business model beginning in 2018 and that GWG L Bonds were not directly collateralized by life insurance policies. As a result, the brokers recommended GWG L Bonds to retail customers without a reasonable basis to believe that the investments were in the customers’ best interest.

Iorio Altamirano LLP, a law firm that represents GWG L Bond investors in filing individual claims to recover investment losses, encourages all investors who purchased L Bonds through Western International Securities, Inc. to contact the law firm for a free consultation to evaluate their options. Collectively, Iorio Altamirano LLP has filed claims seeking to recover over $2.5 million in losses and damages from brokerage firms for the improper sale of GWG L Bonds.

Original Post:

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

Iorio Altamirano LLP, a securities arbitration law firm based in New York, NY, is investigating potential securities arbitration claims against Western International Securities, Inc. for its sale of L Bonds issued by GWG Holdings, Inc. Upon information and belief, Western International Securities, Inc. was a part of Emerson Equity LLC’s network of broker-dealers who sold the speculative, high-risk, and illiquid GWG L Bonds. Iorio Altamirano LLP has spoken to several retail investors who purchased GWG L Bonds through the recommendation of broker Dan Beech, who was registered with Western International Securities in Westlake Village, CA, from May 10, 2016, until March 9, 2022.

On April 20, 2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy, allowing GWG Holdings to propose a reorganization plan. However, many GWG L Bond investors, who have not received interest or maturity payments since January 2022, are skeptical that they will see a return of their invested capital. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

According to the bankruptcy filings, the SEC has been investigating the sales practices related to GWG L Bonds. We believe that this investigation includes the sales practices of Emerson Equity and its regional broker-dealers, such as Western International Securities, Inc.

Brokerage firms like Western International Securities, Inc. are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

About GWG L Bonds

An L bond is a financial product created by GWG. Initially, GWG pooled money from bond investors to purchase life insurance policies on the secondary market, pay the policy premiums, and then collect the death benefit when the insured individual passed away. However, beginning in 2018, GWG used the investor capital to invest in a new business model, which exposed the company to much risker alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

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%.

The L Bonds are speculative, high-risk, and illiquid private placement offerings. They are secured by the assets of GWG Holdings and a pledge of all of the common stock by its largest stockholders.

GWG L Bonds were likely not suitable for investors with a low-to-moderate risk tolerance or investors who had liquidity needs.

Investors who purchased GWG L Bonds should contact New York Securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation to review their legal rights.

Western International Securities, Inc. (CRD No. 39262)

Western International Securities, Inc. is an SEC-registered broker-dealer and investment advisor based in Pasadena, CA. The firm was founded in Colorado in April 1995 and has been a FINRA member since November 1995.

Western International Securities, Inc., which is currently licensed to sell securities in 53 U.S. states and territories, currently has a roster of approximately 456 registered brokers and investment advisors across the country.

According to the firm’s public disclosure report, it has been sanctioned 11 times by regulators for alleged misconduct. The most recent sanction was settled in 2021.

Steven R. Graham (CRD No. 1977736)

Steven Graham has been a dually registered broker and registered investment advisor with Western International Securities, Inc. in Valencia, CA, since September 4, 2020. Mr. Graham has 32 years of experience in the securities industry and has been associated with six different firms.

According to the SEC’s complaint against Western International and Mr. Graham (the “Complaint”), Mr. Graham recommended and sold over $1 million worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $32,500 in commissions. The Complaint alleges that Mr. Graham failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Graham violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

The Complaint details Mr. Graham’s recommendations to two retail customers:

• In or around November 2020, Mr. Graham recommended that a 79-year-old retired truck driver purchase $100,000 in a two-year GWG L Bond. The customer had a moderate risk tolerance and investment objectives that did not include speculation. The customer had limited general investment knowledge and limited knowledge of bonds. At the time of his GWG L Bond purchase, the customer’s annual income was $35,000, and his liquid net worth was $300,000. The GWG L Bonds comprised of 10% of the customer’s net worth and 33% of his liquid net worth. The GWG L Bond was held in the customer’s individual account. In the “rationale” section of the firm’s disclosure forms, Mr. Graham wrote in full: “Customer is seeking a high rate of interest from funds sitting in a bank savings at .05%. They will utilize the interest for supplemental income each month. The Complaint alleges that Mr. Graham did not specify why he believed that the GWG L Bonds were in the customer’s best interest, as opposed to many other investments that offered greater than .05% interest rates. The SEC contends that Mr. Graham’s bases for believing that the $100,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and generic. The Complaint alleges that Mr. Graham did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Graham’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.
• In or around January 2021, Mr. Graham recommended that a 65-year-old retiree purchase $100,000 in a 3-year GWG L Bond. The customer had a moderate risk tolerance and investment objectives that did not include speculation. The customer’s investor profile with the firm represented that he had no general investment knowledge and limited knowledge of bonds. The customer had an annual income of $85,000, a net worth of $1.1 million, and a liquid net worth of $500,000. The GWG L Bonds constituted 9% of the customer’s net worth and 20% of his liquid net worth. The GWG L Bond was held in the customer’s individual retirement account. In the “rationale” section of the firm’s disclosure forms, Mr. Graham wrote that the customer was “seeking an additional income stream to supplement his retirement income” and that he wanted to “leverage a small portion of his IRA portfolio to accomplish this.” However, as pointed out in the SEC’s Complaint, the GWG L Bond was not a “small portion” of the customer’s IRA portfolio. In actuality, the $100,000 GWG L Bond investment constituted 50% of the IRA held at Western International. Mr. Graham’s supervisor and Western International’s compliance department failed to identify the discrepancy. The Complaint alleges that Mr. Graham’s bases for believing that the $100,000 GWG L Bond purchase was in the customer’s best interest were unreasonable, vague, generic, and premised on an erroneous assumption. The SEC contends that Mr. Graham did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation was in the customer’s best interest. The Complaint also alleges that Mr. Graham’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Finally, the Complaint alleges that although Mr. Graham understood that there had been a change in GWG’s business, he failed to take the necessary actions to understand the company’s new business model or assets.

Andy Ravi Gitipityapon (CRD No. 4092978)

Andy Gitipityapon has been a dually registered broker and registered investment advisor with Western International Securities, Inc. in Northridge, CA, since April 9, 2018. Mr. Gitipityapon has 22 years of experience in the securities industry and has been associated with five different firms.

According to the SEC’s complaint against Western International and Mr. Gitipityapon (the “Complaint”), Mr. Gitipityapon recommended and sold approximately $330,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately nearly $10,000 in commissions. The Complaint alleges that Mr. Gitipityapon failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Gitipityapon violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Gitipityapon, the Complaint made the following allegations:

• Mr. Gitipityapon took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Mr. Gitipityapon did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.
• Mr. Gitipityapon did not know how GWG, after it became entangled with Beneficient, made its money or whether Beneficient generated revenues.

The Complaint details one of the recommendations made by Mr. Gitipityapon. In or around August 2020, Mr. Gitipityapon recommended that a 54-year-old restaurant server invest $30,000 into a two-year GWG L Bond. The customer had a moderate risk tolerance, and her investment objectives did not include speculation. She had an annual income of $75,000, a net worth of $400,000, and a liquid net worth of $150,000. The customer’s $30,000 GWG L Bond represented 7.5% of her net worth and 20% of her liquid net worth. The GWG L Bond was purchased in her individual account. In the “rationale” section of the firm’s disclosure forms, Mr. Gitipityapon wrote in full: ” Client had a CD that came due and does not need the funds for a few years. She likes the interest rate of the bond and understands the risk of the GWG bond. This bond meets all of her need and objectives.” The SEC contends that Mr. Gitipityapon’s bases for believing that the GWG L Bond purchase was in the customer’s best interest were unreasonable, vague, and generic. Accordingly, Mr. Gitipityapon did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Gitipityapon’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Thomas Brian Swan (CRD No. 1698430)

Thomas Swan has been a registered broker with Western International Securities, Inc. in Westlake Village, CA, since May 27, 2008. Since October 14, 2014, he has also been an SEC-registered investment advisor with the firm. Mr. Graham has 33 years of experience in the securities industry and has been associated with nine different firms.

According to Mr. Swan’s public disclosure report with FINRA, he has been the subject of at least two customer complaints. In addition, in 2005, the California Department of Insurance alleged that Mr. Swan breached his fiduciary responsibility. The matter was settled, and Mr. Swan paid a fine of $20,000.

According to the SEC’s complaint against Western International and Mr. Swan (the “Complaint”), Mr. Swan, a resident of Acme, Washington, recommended and sold approximately $297,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $12,500 in commissions. The Complaint alleges that Mr. Swan failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Swan violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Swan, the Complaint made the following allegations:

• Mr. Swan took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Mr. Swan erroneously bellied that GWG was continuing to invest in life insurance policies after 2018.
• Mr. Swan did not understand the risks of the GWG L Bonds. He erroneously described the L Bones as relatively safe when in fact, they contained a “high degree of risk.”
• Mr. Swan did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.

The Complaint details two of Mr. Swan’s GWG L Bond recommendations:

• In or around August 2020, Mr. Swan recommended that a 66-year-old retiree invest $55,000 into a seven-year GWG L Bond. The customer had an annual income of $30,000, and her investment objectives did not include speculation. The GWG L Bonds comprised of 10% of the customer’s liquid net worth. She had previously informed Mr. Swan that she did not want any capital risk to the money that provides the income portion of her retirement savings. In the Client Disclosure Form that accompanied the customer’s GWG L Bond purchase, Mr. Swan described her as “a conservative investor.” Neither Mr. Swan’s supervisor nor Western International Securitas’s compliance department identified this discrepancy. During a previous review of her IRA investments with Mr. Swan, the customer had told him she wanted to earn income safely without risking her principal. The SEC contends that Mr. Swan’s bases for believing that the $55,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and unsupported. The Complaint alleges that Mr. Swan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Swan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.
• In or around August 2020, Mr. Swan recommended that another 66-year-old retiree invest $80,000 into a seven-year GWG L Bond. The customer had a moderate-conservatives risk tolerance and identified preservation of capital as one of her investment objectives, but not speculation. The customer had an annual income of $75,000, a net worth of $1.5 million, and a liquid net worth of $900,000. She had limited general knowledge about investments and limited knowledge of bonds. The GWG L Bonds were purchased in her individual account. The SEC contends that Mr. Swan’s bases for believing that the $80,000 GWG L Bond investment was in the customer’s best interest were unreasonable, vague, and unsupported. Accordingly, the Complaint alleges that Mr. Swan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Swan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Nancy Ellen Cole (CRD No. 2900724)

Nancy Cole has been a dually registered broker and investment advisor with Western International Securities, Inc. in Sacramento, CA, since August 29, 2008. Ms. Cole has 24 years of experience in the securities industry and has been associated with five different firms, including one firm that has since been expelled from the industry by FINRA.

According to Ms. Cole’s public disclosure report with FINRA, she has been the subject of at least one customer complaint.

According to the SEC’s complaint against Western International and Mr. Swan (the “Complaint”), Ms. Cole recommended and sold approximately $250,000 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated approximately $10,000 in commissions. The Complaint alleges that Ms. Cole failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Ms. Cole violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Ms. Cole, the Complaint made the following allegations:

• Ms. Cole took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for her misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Ms. Cole did not know about GWG’s business combination with Beneficent until several months after she had recommended GWG L Bonds to customers. At the time that she had sold $250,000 worth of GWG L Bonds to two customers, she erroneously believed GWG was continuing to invest in life insurance policies.
• Ms. Cole did not understand the risks of the GWG L Bonds. She erroneously described the L Bones as relatively safe when in fact, they contained a “high degree of risk.”

The Complaint details Ms. Cole’s GWG L Bond recommendations to a married couple. In or around December 2020, Ms. Cole recommended that a married couple purchase $250,00 worth of two-, three-, five-, and seven-year GWG L Bonds. At the time of the recommendations, the customers were 67 and 61 years old. The 67-year-old customer was retired. Ms. Cole described the customers as “not risk-takers” and “relatively conservative.” Their investment objectives did not include speculation. They had limited general knowledge about investments and limited knowledge of bonds. Collectively, the married couple had an annual income of $106,000 and a liquid net worth of $760,000. The GWG L Bonds, which were held in personal retirement accounts and a joint investment account, comprised 33% of their liquid net worth. The SEC contends that Ms. Cole’s bases for believing that the $250,000 GWG L Bond investment was in the customers’ best interest were unreasonable. Accordingly, the Complaint alleges that Ms. Cole did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe her recommendations of the GWG L Bonds were in the customers’ best interest.

Patrick Michael Egan (CRD No. 2973478)

Patrick Egan has been a registered broker with Western International Securities, Inc. in Pasadena, CA, and Glendora, CA, since January 22, 1998. Since July 30, 2007, he has also been an SEC-registered investment advisor with the firm. Mr. Egan has 24 years of experience in the securities industry and has been associated with two different firms.

According to the SEC’s complaint against Western International and Mr. Egan (the “Complaint”), Mr. Egan recommended and sold approximately $184,500 worth of GWG L Bonds to retail investors between July 2020 and April 2021, which generated at least $5,397 in commissions. The Complaint alleges that Mr. Egan failed to comply with Regulation Best Interest’s Care Obligation and constitutes violations of Regulation Best Interest’s General Obligation. Accordingly, according to the Complaint, Mr. Egan violated Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).

Specifically, with respect to Mr. Egan, the Complaint made the following allegations:

• Mr. Egan took a training course on GWG L Bonds prior to the issuance of L Bonds in June 2020, which may have been the basis for his misunderstanding of important issues regarding GWG and the GWG L Bonds that were disclosed by GWG in the 2020 Prospectus and subsequent public filings.
• Mr. Egan erroneously believed that GWG’s transactions with Beneficient were not significant.
• Mr. Egan acknowledged that the 2020 Prospectus described the GWG L Bonds as high risk but disregarded that disclosure.
• Mr. Egan did not understand the nature of the collateral for GWG L Bonds and failed to appreciate that the life insurance policies themselves did not collateralize the GWG L Bonds.
• Mr. Egan acknowledged that he should have reviewed Beneficient’s financial statements and admitted he did not do so but rather erroneously assumed that Beneficient was profitable.

The Complaint details one of Mr. Egan’s GWG L Bond recommendations. In or around August 2020, Mr. Egan recommended that a 75-year-old retiree with a moderate-conservative risk profile invest $20,000 into a 3-year GWG L Bond. The customer had an annual income of $50,000, a net worth of $250,000, and a liquid net worth of $250,000. He did not include speculation as an investment objective and had limited knowledge of investments in general and of bonds in particular. The GWG L Bonds, which were held in the customer’s individual account, represented 8% of both his liquid and total net worth. In the “rationale” section of the firm’s disclosure forms, Mr. Egan wrote in full: “Client had extra cash in the bank and wanted to earn more interest than can be done in his bank. Client will also have a large cash balance in his bank account in addition to the $20,000 at GWG.” According to the Complaint, besides the rationale section of the Client Disclosure Form, Mr. Egan did not document anywhere his bases for believing that the $20,000 GWG L Bond purchase was in the customer’s best interest. In addition, Mr. Egan did not document why he chose to recommend the GWG L Bonds to the customer as opposed to many other investments that offered higher interest rates than a bank account. The SEC contends that Mr. Egan’s bases for believing that the $20,000 GWG L Bond investment was in the customer’s best interest were unreasonable and not supported by the facts. Accordingly, the Complaint alleges that Mr. Egan did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe his recommendation of the GWG L Bonds was in the customer’s best interest. The Complaint also alleges that Mr. Egan’s supervisor and Western International’s compliance department failed to raise questions or concerns regarding the customer’s bond investment.

Dan Beech (CRD No. 6169844)

Dan Beech is a stockbroker registered with Western International Securities, Inc. in Westlake Village, CA, from May 10, 2016, to March 9, 2022.

Upon information and belief, while registered as a broker with Western International Securities, Inc., Mr. Beech recommended and sold GWG L Bonds to retail investors. Iorio Altamirano LLP is investigating potential securities arbitration claims arising out of Mr. Beech’s sales practices and Western International Securities, Inc.’s supervision of those sales practices.

Mr. Beech has eight years of experience in the securities industry and has been registered with five different firms. He is currently registered with Innovation Partners LLC.

According to Mr. Beech’s public disclosure report, he has had at least two customer complaints. In August 2021, a customer filed a written complaint alleging $62,500 in damages. Mr. Beech settled the matter for the total amount of the alleged damages. In 2019, a customer filed a lawsuit alleging that Mr. Beech made an unsuitable recommendation related to a Real Estate Investment Trust (“REIT”). The dispute was settled for monetary compensation by Western International Securities, Inc.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings through Western International Securities, Inc., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may call the firm toll-free at (646) 330-4624.

**Updates: June 16, 2021** This blog post has been modified from the original post to include individual sections on brokers Steven Graham, Andy Gitipityapon, Thomas Swan, Nancy Cole, and Patrick Egan.

Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar. Despite the unwelcomed news, GWG L bond investors are not without recourse. Many retail investors, including those represented by securities arbitration law firm Iorio Altamirano LLP, are filing securities arbitration claims against brokerage firms that sold these speculative, high-risk, and illiquid financial products. These actions are separate and in addition to the bankruptcy proceedings.

GWG Holdings’ bankruptcy filing revealed for the first time that the ongoing investigation by the United States States Securities and Exchange Commission (SEC) includes an examination of sales practices of the GWG L Bonds by the Selling Group, including Emerson Equity LLC and its network of regional broker-dealers. According to the recent bankruptcy filing, the SEC issued subpoenas and document requests to individual brokerage firms beginning in late-2021.

Investors who purchased the L Bonds offered by GWG Holdings are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, visit our firm’s investigation page: Iorio Altamirano LLP’s Investigation of GWG L Bonds.

GWG L Bonds and Brokerage Firm Liability

GWG sold the L bonds through Emerson Equity LLC and a network of regional broker-dealers, who pitched the products to individual retail investors. The network of regional broker-dealers who sold L Bonds and shared in the selling commissions included the following firms, as well as other broker-dealers:

• Centaurus Financial, Inc.
• Great Point Capital LLC.
• National Securities Corporation.
• Western International Securities, Inc.
• Aegis Capital, LLC.
• Dempsey Lord Smith, LLC.
• Coastal Equities, Inc.
• International Assets Advisory, LLC.
• Arete Wealth Management, LLC.
• Capital Investment Group, Inc.
• Lifemark Securities, Corp.
• Westpark Capital, Inc.
• Ausdal Financial Partners, Inc.
• Moloney Securities.
• IFP Securities, LLC.
• Center Street Securities.
• Cabot Lodge Securities LLC.
• Kingswood Capital Partners, LLC.
• American Trust Investment Services, Inc.
• Ages Financial Services, LTD.
• Landolt Securities, Inc.
• Intervest International Equities Corporation.
• Titan Securities.
• NI Advisors.
• JRL Capital Corporation.
• The FIG Group, LLC.
• M Stevens Securities, LLC.

Brokerage firms are required to make investment recommendations that are suitable and in the best interest of their customers. GWG’s L Bonds are speculative, high-risk, and illiquid securities sold as private placement offerings by brokerage firms across the country. The L Bonds were likely not suitable for investors with a low or moderate risk tolerance or investors who had liquidity needs.

Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Through the course of Iorio Altamirano LLP’s investigation, investors informed the firm that they were not aware that GWG significantly changed its business model beginning in 2018 or that GWG used investor capital to pay out high distributions to other GWG L bond investors in a Ponzi-like scheme.

When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any retail investor. There are serious concerns that some broker-dealers recommended GWG’s L Bonds to customers without first conducting sufficient due diligence on the GWG L bonds or GWGH.

How to Recover Losses or Obtain a Free Consultation

In light of the bankruptcy filing, L bond investors are encouraged to immediately contact Iorio Altamirano LLP to review their legal rights. Iorio Altamirano LLP is representing numerous GWG L bond investors in filing securities arbitration claims against firms such as Emerson Equity LLC and Centaurus Financial, Inc. for sales practice violations connected to the solicitation and sale of GWG L Bonds.

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you or a loved one has invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.