GWG Holdings Inc., was an alternative asset manager which issued a series of high-yield bonds known as “L Bonds.” An L Bond is an alternative investment vehicle that attempted to provide a high yield for an investor/lender in exchange for bearing the risk that an insurance policy premium or benefits may not be paid. An L Bond is an unrated life insurance bond that is used to finance the purchase and to pay premium payments of life insurance settlement contracts purchased in the secondary market. GWG L Bonds were illiquid investments.
GWG L Bonds were publicly offered and sold on a continuous basis in 2014, 2017 and again in 2020 for a total of $4 billion in principal through a massive network of small- to medium-sized broker-dealers and investment advisers. Brokers were incentivized to sell GWG L Bonds due to their generous commission structure coupled with the high interest rates. Many firms turned a blind eye to their due diligence obligations and relied on third-party due diligence reports paid for by GWG Holdings. As a result, firms missed obvious disclosures about the financial conditions of the company.
According to its SEC filings, GWG Holdings, Inc. was never a successful company. With the exception of one year, GWG lost money every year from 2012 through 2020 and ran massive operating losses. The following chart, drawn from GWG’s SEC 10-K filings shows how poorly the company performed year after year.
GWG Yearly Profit (Loss) and Cash Flows from Operations
Year | Profit (Loss) | Net (Negative) Cash Flow from Operations |
2012 | ($1,012,899) | ($27,168,894) |
2013 | ($194,955) | ($31,385,508) |
2014 | ($5,962,909) | ($42,467,241) |
2015 | ($7,393,274) | ($39,716,927) |
2016 | $391,909 | ($66,013,897) |
2017 | ($20,632,223) | ($83,805,558) |
2018 | ($119,451,413) | ($95,479,054) |
2019 | $108,109,000[1] or ($137,530,000) | ($142,830,000) |
2020[2] | ($215,839,000) | ($182,400,000) |
The GWG L Bond prospectuses stated, “An investment in the L bonds involves significant risks, including the risk of losing your entire investment, and may be considered speculative.” Any due diligence officer, due diligence committee, broker, or supervisor reading that statement was on notice that GWG L Bonds were suitable, if at all, for a very narrow band of investors who could afford losing their entire investment.
In February 2018, GWG commenced a merger with a recently formed company, Beneficient Capital Group (“Beneficient”). Beneficient loaned money to investors stuck in illiquid alternative investments or bought the investments outright. GWG and Beneficient changed GWG’s business model so that GWG stopped purchasing life insurance policies and started investing in Beneficient and its alternative investments. This change in the constitution of the GWG L Bonds greatly raised the risk of purchasing GWG L Bonds.
In 2019, GWG halted issuing GWG L Bonds because it could not timely file its required SEC reports.
When GWG filed its Form 10Q for the first quarter of 2020, it included a new asset, “Goodwill.” GWG valued its “Goodwill” at $2.37 billion. GWG created a $2.37 billion asset out of whole cloth! Any due diligence officer, curious to see what had been going on behind the scenes at GWG during its six-month hiatus, would have seen the blazing red flag had they been reviewing GWG’s financial statements.
In 2021 GWG’s bond issuances were halted again because of its financial and regulatory woes. In January 2022, GWG defaulted on all interest payments and shortly thereafter filed for bankruptcy.
Numerous arbitration claims were filed against brokerage firms including Emerson Equity, Arete Wealth Management, and Western International Securities for losses related to the unsuitable recommendation and sale of the GWG L-Bonds. FINRA and the SEC have brought regulatory enforcement actions against firms, brokers, and advisers who sold GWG L Bonds to unsuspecting customers.
GWG's bankruptcy proceeding remains on-going with L Bond investors anticipated to receive pennies on the dollar.
In August 2025, Jonathan W. Evans & Associates won the, to-date, largest GWG L-Bond arbitration award, $280,000, against a solvent broker-dealer, Arete Wealth Management. (FINRA Case No. 22-01257)
If you suffered losses after investing with any investment adviser or broker who sold GWG L bonds, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
[1] GWG reported a net income for the 2019 calendar year mainly on a “gain on consolidation of equity method investment” valued at $249,700,000. This accounting irregularity appeared in GWG’s 10K for 2019, filed with the SEC on March 20, 2020. This irregular “gain” is a non-cash, accounting adjustment reflecting a change in GWG’s estimated fair value of its investment in the common units of Beneficient LP. The “gain” is not the result of any revenue earned by GWG. Without the “gain on consolidation of equity method investment,” GWG reported a net loss from operations of $137,530,000 for the 2019 calendar year.
[2] GWG filed its 2020 10-K on November 5, 2021.