Elderly Couple is Seeking Up to $500K Plus Interest and Costs Against Centaurus Financial
Two older investors, both retired and on disability, have filed a Financial Industry Regulatory Authority (FINRA) arbitration claim against brokerage firm Centaurus Financial over losses they sustained from purchasing GWG L Bonds.
GWG Holdings, Inc., a Dallas-based alternative asset firm, filed for Chapter 11 bankruptcy in April 2022. Now, this Texas couple is among the many thousands who have been left holding these high-risk, illiquid junk bonds that may not be worth much at all at this point.
Our GWG L Bond lawyers are representing these claimants in FINRA arbitration. We continue to investigate claims of L Bond losses by other investors.
Centaurus Financial Persuaded These Inexperienced Investors to Buy Into L Bonds and REITs
The claimants, both conservative and unsophisticated investors, were investing their money through another brokerage firm when they decided to attend a free investing seminar sponsored by Centaurus Financial brokers. Following the event, these financial advisors called them several times until they agreed to meet.
During this meeting, the Centaurus Financial registered representatives proceeded to malign the other firm while claiming the retirees’ investments at the time were costly, unsuitable, and too risky for them. The brokers persuaded the couple to exit these investments, which they had already paid for, and generated a monthly income.
The retirees then entrusted $385K of their money to Centaurus Financial, which invested most of these assets in illiquid, privately traded products that charged high commissions. This included investing $100K in L Bonds. Meanwhile, the Centaurus Financial brokers and GWG L Bonds managing broker-dealer Emerson Equity charged them 8% in commissions.
Investors Were Also Recommended Two Unsuitable and Risky REITs
Centaurus Financial also recommended that the retirees invest $270K of their money in CIM and Mackenzie, two privately traded real estate investment trusts (REITs). CIM and Mackenzie were unsuitable and too risky for these older investors. Like the GWG L Bonds, Mackenzie and CIM charged high commissions that the firms and their financial advisors pocketed.
Also, the claimants were told they could easily exit these products, which is far from the truth. Not only that but with over 200 publicly traded REITS found on Amex or the NYSE, why not invest the couple in one of those?
Unfortunately, Centaurus Financial failed to warn the claimants of how risky any of these investments were or that GWG bond repayments were made in a Ponzi-like fashion with the money coming from bonds sold to newer investors. Instead, the firm concentrated the Texas couple’s money on these alternative investments despite the latter’s directive that their funds be placed only in safe products.
Centaurus Financial “Padded” Elderly Customers’ Net Worth, Investing Goals, and Risk-Tolerance
To invest these retirees in L Bonds and the REITs, Centaurus Financial had to “pad” new account forms to get around compliance issues. This included exaggerating these investors’ net worth, investing goals, and risk tolerance levels. Clearly, the broker-dealer was more in the business of selling private placement-type products rather than making it their business to look out for the couple’s best interests.
If there was any at all, the supervision involved was simply inexcusable. The Centaurus Financial advisors appear to have been self-supervised and with no on-site compliance. Any reasonable supervisor would not have approved the trades and recommendations made for these retirees. Misrepresentations and omissions were clearly made. Negligence, even gross negligence, was clearly a factor.
Skilled GWG L Bond Law Firm
SSEK Law Firm represents several GWG L Bond investors against the brokerage firms that sold these junk bonds. If you would like us to help you explore your legal options, call our knowledgeable securities attorneys at (800) 259-9010 today. You can reach our lawyers in Texas at (214) 613-5306.