GWG bondholders tee up complaints opposed to broker-dealers, executives

Dealer-dealers that advertised and bought GWG L Bonds — so referred to as as a result of they had been subsidized by means of existence settlements — must brace for criminal motion, as a gaggle representing with reference to 27,000 retail buyers takes purpose at more than a few GWG Holdings Inc. executives and the companies that bought $1.6 billion of the bonds.

In a courtroom submitting made Dec. 15 in U.S. chapter courtroom in Houston, the GWG reliable committee of bondholders claimed that GWG Holdings used to be a “multiyear lengthy fraud orchestrated by means of Brad Heppner to complement himself and related company entities by means of plundering the borrowers.”

Heppner is the CEO and chairman of The Beneficient Corporate Workforce, an asset supervisor which took keep watch over of GWG in 2019, in step with the submitting.

The courtroom submitting, a movement to go into a proposed lawsuit, additionally took purpose at “key broker-dealers that advertised and bought the [GWG] L Bonds.”

“Via no fault of their very own, many of those L Bondholders face monetary destroy as a result of GWG Holdings Inc., thru a gaggle of make a choice broker-dealers, aggressively and misleadingly advertised and bought L Bonds even after it was transparent that its industry used to be failing and the one method to pay off the ones bondholders used to be to proceed to promote but extra L Bonds to present and extra retail buyers,” in step with the submitting, which mentioned that it meant to record proceedings opposed to Heppner, positive broker-dealers, and different more than a few executives and entities. “Put merely, GWG used to be a vintage Ponzi scheme.”

The submitting didn’t title explicit companies that bought the L Bonds however claimed as many as 145 broker-dealers advertised the product.

“The committee’s movement is filled with baseless accusations, egregious mistakes and more than a few distortions bearing on the Beneficient-GWG dating,” a Beneficient spokesperson wrote in an e mail. “Specifically, the committee’s malicious assaults on Mr. Heppner are unsupported by means of any precise proof and info.”

After weeks of hypothesis, GWG Holdings in April mentioned it had voluntarily filed for Bankruptcy 11 chapter coverage. In January, GWG did not make $13.6 million in blended passion and primary bills for its L Bonds collection, in the long run defaulting on the ones bonds.

Every GWG L Bond proprietor invested about on reasonable lower than $45,000, in step with the submitting. However the bonds had been at all times illiquid and now don’t have any decided worth.

The reliable committee of bondholders claimed that Beneficient and Heppner “had been in a position to siphon price range out of GWG thru a chain of deeply conflicted, related-party transactions,” in step with the submitting.

“For many of its life, GWG invested in existence insurance coverage insurance policies bought throughout the secondary marketplace,” in step with the submitting. “To fund its industry, GWG raised debt within the type of debentures referred to as L Bonds, which since 2012 had been advertised to person buyers around the nation thru a national community of broker-dealers.”

“A number of years and loads of thousands and thousands of bucks in received insurance policies later, GWG’s founders may just now not get away the truth that their industry used to be unsustainable, unprofitable, and most probably bancrupt from the very outset,” in step with the submitting. “By means of the tip of 2018, GWG had turn into bancrupt, and its insolvency would simplest deepen as its eventual dating with [Beneficient] intensified between 2019 and 2021.”

Within the submitting, the reliable committee of bondholders mentioned its claims had been according to interviews, depositions, and loads of hundreds of pages of record discovery, and intensive monetary research.

[More: GWG chiefs bolt in middle of bankruptcy]