Firm Owes Millions to Investors of GWG High-Yield L Bonds
Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) is looking into claims of losses by customers who purchased GWG L Bonds at the recommendation of Emerson Equity broker Tony Barouti.
Unfortunately, it appears that Barouti, who is based out of Los Angeles, may have unsuitably sold L Bonds to several investors, including retirees and older retail customers.
Emerson Equity, where Tony Barouti has been a financial advisor for four years, is the managing broker for GWG Holdings. However, many other firms may have sold GWG L Bonds to customers, including Aegis Capital, Centaurus Financial, and others. SSEK Law Firm is investigating all of these broker-dealers.
Why Should L Bond Investors Be Worried?
GWG Holdings, Inc. (GWGH) is the issuer of L Bonds. The Texas-based alternative asset firm recently admitted to being late on a payment of $13.6 million that was due to investors on January 15, 2022. The 30-day grace period that GWG Holdings has to submit payment has passed. The failure to pay in time is considered a default.
In its January 18, 2022 filing with the US Securities and Exchange Commission (SEC), GWG Holdings said that a decrease in L Bond sales had caused a shortage in cash. Its Form 10-K for the year concluding on December 31, 2021, will likely be submitted late after the company’s independent auditor Grant Thornton resigned.
In GWG’s Form 10-K for the year ending December 31, 2020, the firm listed a bunch of concerns that raised questions about its ability to keep moving forward, including:
- Potentially not being able to continue raising capital
- Recurring operational losses
- Delays in implementing business plans
- An ongoing SEC non-public, fact-finding probe
In the last few years, GWG Holdings has reported net losses of nearly $530M.
What are GWG L Bonds?
This private placement is a high-yield bond and an alternative investment. Money pooled from their sales is used by GWG Holdings to buy life insurance policies. GWG L Bonds offered an 8.5% yield.
However, they are risky, illiquid, unrated, and complex investments that should only have been sold to suitable investors. There are also growing worries that brokers may have misrepresented the risks involved in investing in L Bonds.
Barouti Was Previously Accused of Misrepresentations
According to his BrokerCheck record, Barouti has worked 22 years in the industry. Other firms where he used to be a registered financial advisor include:
- First Heartland Capital
- LPL Financial
- Newport Coast Securities
- Commonwealth Financial Network
- Brookstreet Securities
- Jefferson Pilot Securities
- Linsco Private Ledger
- and World Group
- WMA Securities
In an investor dispute from 2015, the claimant accuses Barouti of making misrepresentations while soliciting a product. The customer is requesting $100K in damages.
Skilled GWG L Bond Lawyers
To schedule your free case consultation, contact our experienced L Bond attorneys at (800) 259-9010. Many investors seem to have suffered financially when investing in these alternative investments by GWG Holdings. If you believe that you are one of these investors, seek legal advice today. You can also speak to our California investment fraud lawyers directly at (619) 550-4847 or contact us online.