Update: Federal Court Approves GWG Bankruptcy Plan

The GWG L bond saga continues. In our last update, we discussed GWG’s bankruptcy filing and a Wall Street Journal article that highlighted some of the issues underlying potential claims against GWG and firms such as Emerson Equity that sold GWG’s L bonds to unsuspecting investors. In April, a federal court approved GWG’s bankruptcy plan—even though the judge “questioned [GWG’s] ownership of two subsidiaries that hold most of its assets.”

The approval gives GWG access to $10 million in additional financing—a move that may seem incongruous to many L bond investors who are still waiting to get paid. Unfortunately, the judge’s decision may in fact make it more difficult for L bond investors to recover their losses without taking legal action. At the very least, it is likely to extend the timeline—even though it has already been well over a year since it became clear that investors would not be recouping their investments through principal and interest payments from GWG.

What Are GWG L Bond Investors to Do?

With GWG getting another financial “lifeline” (as reported by The Wall Street Journal) and with no end to the bankruptcy process in site, what are GWG L bond investors to do? At this point, many investors are taking legal action on their own. Several GWG L bond investors have filed arbitration claims with the Financial Industry Regulatory Authority (FINRA) to recover their investment losses. FINRA arbitration provides a venue for investors to recover their fraudulent investment losses outside of the bankruptcy process, and, crucially, it provides an opportunity for investors to pursue claims against their advisors rather than (or in addition to) pursuing claims against GWG directly.

While GWG has been under the microscope since the U.S. Securities and Exchange Commission (SEC) raised red flags about its “alternative assets” investment strategy, GWG isn’t the only firm facing scrutiny. The firms that sold GWG L bonds to investors are facing scrutiny as well. Investigations have revealed that these firms failed to conduct adequate due diligence in many cases—and, as a result, dangerously recommended that their customers invest in GWG’s high-risk bond products.

Before recommending investment products, firms have a duty to ensure that they are making informed and “suitable” investment recommendations. Simply put, GWG’s L bonds were not suitable for most retail investors. When they make unsuitable investment recommendations, firms breach their fiduciary duty of care—and they can, and should, be held liable. FINRA arbitration is the most suitable and efficient venue for investors to pursue these claims in most cases.

Speak with a Lawyer About Filing a GWG L Bond Loss Claim in Confidence

If you need to know more about your options after suffering GWG L bond losses, we encourage you to contact us promptly for more information. Our firm represents investors in FINRA arbitration claims nationwide. To discuss your legal rights with an experienced lawyer at Zamansky LLC in confidence, please call 212-742-1414 or tell us how we can reach you online today.