Securities Arbitration Lawyer Blog
Investor advocate law firm Iorio Altamirano LLP is investigating potential securities arbitration claims against Centaurus Financial, Inc. for its sale of L Bonds issued by GWG Holdings, Inc. Upon information and belief, Centaurus Financial, Inc. was a part of Emerson Equity LLC’s network of broker-dealers who sold the speculative, high-risk, and illiquid “L Bonds” issued by GWG Holdings.
On April 20, 2022, GWG Holdings, Inc. filed for Chapter 11 bankruptcy. Despite the unwelcomed news, GWG L Bond investors can file individual arbitration claims to recover losses from the brokerage firm that sold them these speculative bonds. Brokerage firms, like Centaurus Financial, 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. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.
Firms and brokers are also required to conduct reasonable due diligence on products they offer before recommending them to any clients. There are serious concerns that some broker-dealers failed to understand the material risks and features of GWG L Bonds. For example, in April 2020, Centaurus Financial raised the cap on how much the firm would allow customers to purchase despite GWG’s significant departure from the life settlements business and its foray into a risker alternative asset business, making it a much larger credit risk. The limit was raised from $100,000 to $150,000, or no more than 10% of the customer’s net worth (excluding primary residence), whichever is less. August Iorio, a managing partner of Iorio Altamirano LLP, was recently quoted in Investment News about Centaurus Financials’ remarkable decision.
According to our conversations with Centaurus Financial customers, brokers hounded their clients after the cap was raised to invest up to the new max. It is clear to us that Centaurus Financial and its brokers were motivated by commissions and did not have their customers’ best interests in mind when making these recommendations.
Moreover, in the 17 months prior to the cap being raised, GWG had failed to timely file its financials with the SEC four times, had its public accounting firm resign, suspended the sale of L Bonds for over three months (May 1, 2019 – August 8, 2019), received a request from the SEC for unredacted copies of its 10-K, had its founding stockholders sell their interests, and had Beneficent appoint an entirely new board of directors. A timeline of events can be found on our website: https://www.iorioaltamirano.com/gwg-holdings-inc-s-l-bonds.html
Investors who purchased the L Bonds offered by GWG Holdings through Centaurus Financial, Inc., are encouraged to contact Iorio Altamirano LLP for a free and confidential consultation. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.
Retail investors can file an individual arbitration claim against the selling brokerage firm without impacting an investor’s potential recovery from GWG Holding Inc.’s bankruptcy proceeding or through any class action lawsuits filed against GWG Holdings.
See Also:
GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy
About the L Bonds
An L bond is a financial product created by GWG, which pooled money from bond investors to purchase life insurance policies on the secondary market, and then used payouts from the policies when people died to repay investors.
GWG Holdings began selling L Bonds in 2012. According to a firm Form 8-K, it began selling a $2 billion L Bond offering in the summer of 2020 to a growing network of advisors from 127 firms.
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.
According to the June 2020 offering prospectus, the key features and risks of the L Bonds include:
- Speculative, High-Risk, Illiquid: “Investing in our L Bonds may be considered speculative and involves a high degree of risk, including the risk of losing your entire investment…. The L Bonds are only suitable for persons with substantial financial resources and with no need for liquidity in this investment.”
- Illiquid: “We do not intend to list our L Bonds on any securities exchange during the offering period, and we do not expect a secondary market in the L Bonds to develop. As a result, you should not expect to be able to resell your L Bonds regardless of how we perform. Accordingly, an investment in our L Bonds is not suitable for investors that require liquidity in advance of their L Bond’s maturity date.”
- 6% charge to redeem early: “In the event we agree to redeem L Bond upon the request of an L Bond holder — other than after death, bankruptcy or total permanent disability— we will impose a redemption fee of 6% against the outstanding principal balance of the redeemed L Bond.
- Subordinate Debt: “We maintain senior borrowing arrangements that subordinate to our senior lenders the right to payment on, and the collateral securing, the L Bonds. In addition, these borrowing arrangements restrict our receipt of distributions from certain of our operating subsidiaries, subject to certain exceptions. These provisions will restrict cash flows available for payment of principal and interest on the L Bonds. From time to time we may add or replace senior lenders and the particular arrangements under which we borrow from them.”
- L Bonds Sold as “Units” of $1,000: L Bonds will be sold as “Units,” with each whole Unit representing $1,000 in principal amount of L Bonds.
L Bonds were likely not suitable for investors with a low-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.
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 Centaurus Financial, Inc., contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, you may reach the firm by phone toll-free at (855) 430-4010.