The alternative asset management firm GWG Holdings has filed for Chapter 11 bankruptcy to address more than $2 billion in liabilities. In a letter to investors, the company stated that it cannot sell or make interest payments on its L Bonds until it settles these debts, and it has suspended sales of the bonds indefinitely. This has led to significant losses for investors in the bonds. The investment firm is a Dallas-based alternative asset manager, and its L Bonds are designed to purchase life insurance policies on the secondary market, and provide a payout in case the insured party dies.

Who is the biggest seller of bonds?

GWG Holdings marketed its bonds as high-interest, low-risk investments that backed by the life insurance policies purchased with the proceeds. However, these “life” bonds were illiquid and risky, as investors could not sell the bonds unless they agreed to redeem them with GWG Holdings for a 6% penalty. This was not suitable for many of the retail investor buyers, which included retirees and elderly people with a more conservative investing objective.

Brokerage firms and financial advisors have a duty to conduct sufficient due diligence on securities before recommending them to clients. They must also disclose all material facts and risks associated with the investment, including any association to life insurance policies. We believe that numerous brokerage firms recommended GWG’s gwg bonds to investors without disclosing these associations and the substantial risks involved.

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