GWG Holdings Inc., an alternative asset manager known for selling life-insurance bonds to retail investors, filed for bankruptcy yesterday after accounting issues and the resignation of its auditor prevented it from continuing to sell its products, WSJ Pro Bankruptcy reported. Dallas-based GWG created financial instruments called L Bonds, which pooled money from bond investors to purchase life-insurance policies on the secondary market, aiming to use payouts from the policies when people die to repay the investors. The company enters chapter 11 with more than $1.6 billion of L Bonds outstanding, mostly owned by individual investors who bought them after hearing a sales pitch from regional broker-dealers who sold the bonds on GWG’s behalf. The Wall Street Journal previously reported that GWG was preparing to file for bankruptcy amid a Securities and Exchange Commission investigation into the company’s financial accounting and its issuance of L Bonds. The SEC probe, which began in 2020, remains ongoing, GWG Chief Financial Officer Timothy Evans said in court papers Wednesday. GWG was forced to stop selling additional L Bonds because of accounting problems that delayed the filing of its 2020 annual report, as well as the resignation of its auditor, leading the company to fail to make interest payments to L Bond holders in January. Many of the investors in the L Bonds are elderly or retired individuals, some of whom invested much of their life savings, according to a number of L Bond holders and broker-dealers who sold them the securities.
