GWG Holdings Updates

• December 2019: GWG Holdings reports large financial losses.
• December 2020: GWG reports additional losses and lack of cash flow.
• April 2021: SEC launches an investigation of GWG over accounting irregularities.
• April 2021: GWG suspends L bond offerings for future sales.
• January 2022: GWG’s accounting firm resigns.
• February 2022: GWG suspends future payments to L bond investors.
• April 2022: GWG files for bankruptcy. They list $2.1 billion in debt and $3.5 billion in assets.
• July 2022: News breaks that GWG chairmen has taken $174 million before GWG bankruptcy.
• November 2022: Bankruptcy judge says GWG’s largest asset not even worth $90 million
• December 2022: GWG Holdings CEO and CFO resigned amidst bankruptcy and lawsuits

In April 2021, the SEC began investigating GWG over accounting irregularities, and GWG announced it faced being delisted from the NASDAQ and would need to suspend all L bond sales. GWG said that — in addition to years of the company losing money — the news of the SEC investigation, NASDAQ delisting, and suspension of L-bond sales raised “substantial doubt about our ability to continue” (i.e. stay in business).

As if GWG’s situation could not get worse, their independent auditor resigned after GWG said it would not file its financial statements on time with the SEC. This lack of transparency may have raised concerns given the SEC was already investigating irregularities in GWG’s financial accounting.

Following the news of the company’s financial troubles, its stock price plunged as low as $3.19 (as of early 2022).

GWG officially defaults on its obligations to L Bond investors and confirms in a letter to investors that it will not be making monthly interest or maturity payments on its GWG L Bonds, or accept redemption requests,

In February 2022, GWG Holdings (ticker: GWGH) officially defaulted on its obligations to L-bond investors to make monthly interest and maturity payments.

GWG also announced in a letter to investors that it would no longer accept redemption requests. Redemptions are crucial when you’re dealing in illiquid assets like L-bonds. There’s no open market for L-bonds, so you cannot sell L-bonds to other investors. The only willing buyer of L-bonds is GWG itself (when it is accepting redemptions). But GWG’s default on L-bonds and suspension of redemptions means the company is not willing to buy its own L-bonds (back from investors).

With the future of the company so uncertain, its difficult to say how much GWG L-bonds will ever be worth if they are worth anything at all.

In April 2022, GWG Holdings announced that it was filing for Chapter 11 bankruptcy. The bankruptcy announcement comes in light of an ongoing SEC investigation into the company’s accounting issues, and will likely not come as a surprise for anyone following GWG closely.

According to the Wall Street Journal, GWG has sold over $1.6 billion worth of L Bonds, but now investors remain stuck in these illiquid investments. It’s questionable whether GWG’s assets will be enough to cover what it owes investors. The Wall Street Journal reports that GWG’s chairman siphoned funds for personal use, leaving GWG as a “shell” with assets that now include “roughly 1,000 life-insurance policies” and “a noncontrolling stake in a biotech venture.” WSJ reports, “GWG has also been facing litigation by L Bond holders alleging it misused bond proceeds and failed to disclose SEC probes that could have affected their investment decisions.”

The bankruptcy, siphoning of funds, and speculative nature of GWG’s remaining assets could mean serious trouble for L-bond holders hoping to recover any of their money from GWG anytime soon.

The GWG bankruptcy judge had bad news for investors hoping to recover their full investments from GWG. Judge Marvin Isgur said that GWG’s largest asset is worth considerably less than what GWG thinks its worth:

“I find [GWG’s] valuation ….. is, for a lack of a better term nuts. The conclusion that someone should today value [their largest asset] at $90 million when no one will pay anywhere near that for them makes no sense at all.”

If GWG’s largest asset isn’t even worth $90 million, how does it expect to pay back the $1.6 billion it owes to its creditors, primarily L-bond investors?

Dejected by repeated bad news from the bankruptcy, many L-bond investors are turning to lawsuits against the brokerages that told their employees (the brokers) it was okay to recommend L-bonds to investors, even though there were serious signs of trouble in 2019, and possibly earlier.