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In December 2024, a FINRA arbitration panel in Boca Raton, Florida ordered a former financial advisor to pay $6,000 in compensatory damages to an investor in GWG L Bonds. The award also included $988.59 in pre-judgment interest and post-judgment interest at the Florida statutory rate. While many GWG arbitration cases have resulted in six- and seven-figure awards, this case shows that panels will hold individual advisors liable, even in arbitrations involving smaller damages claims.
GWG’s High-Risk L Bond Offerings
GWG Holdings marketed and sold over $1.6 billion of “L Bonds” to retail investors across the U.S. These fixed-term investments were promoted as being secured by life insurance assets and paying interest rates of roughly 5.5% to 8.5%. Terms ranged from two to seven years, and unless canceled, the bonds automatically renewed at maturity.
While presented as safe income-producing instruments, L Bonds carried substantial risks. They were unrated, non-tradable, and callable at the company’s discretion. Many investors rolled their funds into new bonds, leaving them with limited liquidity and significant exposure.
GWG’s shift of substantial capital to Beneficient Company Group, L.P. soon caught regulators’ attention. Authorities expressed concern about GWG’s accounting procedures and the way its L Bonds were being marketed. The SEC issued subpoenas in October 2020, later widening its inquiry to include multiple broker-dealers responsible for selling the bonds.
After years of questionable accounting and failed oversight, GWG Holdings’ troubles came to a head in 2021 when its auditor resigned. In January 2022, the company defaulted on a $3.25 million interest payment and filed for Chapter 11 bankruptcy a few months later. The GWG Wind Down Trust now estimates investors will recover only 2–3% of their invested funds, underscoring the severe impact of the collapse.
The Panel Findings
The investor alleged breach of fiduciary duty, negligence, negligent misrepresentation, breach of contract, failure to supervise, and violations of Regulation Best Interest. The claims focused on unsuitable recommendations of GWG L Bonds and other alternative investments.
The panel dismissed the claims against brokerage firms Cabot Lodge Securities and SW Financial following settlements and voluntary dismissals. The case proceeded only against the individual advisor, who appeared pro se. The panel found him liable and ordered compensatory damages, pre-judgment interest, and post-judgment interest at the statutory rate.
- Suitability (FINRA Rule 2111): Even small-dollar purchases of GWG L Bonds may be unsuitable for certain investors. GWG’s 2020 prospectus, part of its final $2 billion L Bonds offering, set the minimum investment at $25,000 (25 units at $1,000 each). That same filing warned L Bonds were speculative, carried a high degree of risk, and could result in a total loss. For retirees and conservative investors, those risks made the bonds unsuitable.
- Regulation Best Interest: Brokers must act in the best interest of retail clients when recommending securities transactions.
This case shows that even in smaller claims, arbitration panels may hold individual advisors liable for unsuitable GWG sales. It also illustrates that statutory interest can increase an investor’s recovery, even when the principal damages are modest.
The Arbitration Award
The arbitration panel awarded the investor:
- $6,000 in compensatory damages
- $988.59 in pre-judgment interest under Florida law
- Post-judgment interest at the Florida statutory rate until paid in full. Learn more about how state securities statutes can enhance investor recovery on our Securities Violations page.
The panel denied punitive damages, treble damages, and attorneys’ fees.
Why This Award Matters
This case shows that even in smaller claims, arbitration panels may hold individual advisors liable for unsuitable GWG sales. It also illustrates that statutory interest can increase an investor’s recovery, even when the principal damages are modest.
Although GWG filed for bankruptcy, given the trustee’s projection that bondholders may recover only 2–3% of principal invested, investors can still pursue claims against the brokers and firms that sold the bonds. Panels have awarded damages ranging from small claims like this one to more than $1 million. Read more about GWG L Bonds in our GWG L Bonds Claims page. GWG L Bonds are also one example of the risks associated with Alternative Investments.
Key Takeaway for Investors
Awards like this show that liability may not be limited to firms but that individual advisors can be held liable for unsuitable sales of GWG L Bonds. Investors are recovering damages and statutory interest through arbitration.
Contact Altamirano PLLC About GWG L Bond Claims Today
If you invested in GWG L Bonds and have losses, call Altamirano PLLC today. Many investors were told these bonds were “safe” or “low-risk,” but in reality they were high-risk, complex, illiquid, and unsuitable for investors, including retirees and conservative investors. We have recovered millions of dollars for investors in GWG L Bond cases. We continue to represent GWG investors nationwide in FINRA arbitration to recover losses from unsuitable sales and misrepresentations.
Call us at (212) 220-6556 to discuss your options. We handle cases on a contingency fee basis, which means you do not owe us a legal fee unless we recover for you.
Contact Jorge Altamirano, Principal of Altamirano PLLC
One World Trade Center, 85th Floor
New York, NY 10007
(212) 220-6556
[email protected]
Securities claims are time-sensitive. Harmed investors are encouraged to act quickly and contact Altamirano PLLC to speak with an experienced securities arbitration lawyer.
