Scott Silver Discusses GWG Bonds With The Deal

Lighthouse Life Capital LLC’s bonds may involve similar risk to defaulted GWG L Bonds, Scott Silver, Silver Law Group’s managing partner, recently told The Deal publication. Silver Law Group represents GWG L Bonds investors in FINRA arbitration claims and in a class action lawsuit.

GWG Holdings (GWGH) is a Dallas, Texas-based financial services firm that sells alternative investments and insurance, and will reportedly be filing for bankruptcy. GWG sold $1.6 billion of L Bonds, which are illiquid bonds backed by life insurance policies.

GWG filed an 8-K with the SEC that said they would not make dividend payments for January, 2022, were halting sales of L Bonds, and that a restructuring advisor may be hired. GWG is also under SEC investigation, is late on filing financial reports, and the company’s stock price has dropped drastically in 2022.

Scott Silver told the Wall Street Journal that “many of our clients are retail investors who bought the bonds after hearing the products were safe and would offer a comfortable income stream for their retirement but that they were shocked to learn that their money was used to pay old investors while the company was under SEC investigation.”

Investing In Insurance Policies Or Life Settlements

Like GWG, Lighthouse Life sells bonds that are invested in life settlements, and relies on bond sales to pay for operations. Lighthouse’s CEO, Michael Freedman, who previously served as GWG’s president, told The Deal that Lighthouse’s business is not buying life settlements for its own portfolio like GWG, but selling policies they acquire to other investors.

Lighthouse Life’s offering is much smaller than GWG’s. The company reported that it’s trying to raise $50 million in a Reg A+ offering, started selling the bonds in February, 2021, and sold $15.5 million by the end of 2021. Their documents state that their class A senior Beacon Bonds pay 8.5% annual interest with a five year term and Class B bonds pay 6.5% interest annually with a three year maturity.

According to Scott Silver, something GWG and Lighthouse have in common is that investors are taking significant risks by investing in the company’s bonds.

“In reality, Lighthouse is a new company, hemorrhaging cash and making these bonds subordinate to all of its other liabilities…The risk is huge compared to the potential return of 8.5%,” Scott Silver told The Deal.

Like GWG, Lighthouse Life uses outside brokers and investment advisers to sell their bonds to investors. Scott Silver raised concerns about the commissions paid to advisers, saying “The question is why any investment bank recommends this type of product to its customers and I believe the answer is obvious. Lighthouse pays a 10% commission (8% + 2% O&O fee)” O&O stands for organizational and offering.

Emerson Equity worked with GWG to sell L Bonds to investors across the country. Many GWG Investors have already hired attorneys to file FINRA arbitration claims against their financial advisor. Allegations include lack of due diligence into the product and unsuitability.

Contact Our Securities Attorneys

Silver Law Group is a nationally-recognized investment fraud and securities arbitration law firm. We have extensive experience recovering losses through arbitration and in court. Our attorneys represent clients around the country and internationally and are committed to helping investors recover losses.

Scott Silver, Silver Law Group’s managing partner, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice. Contact us for a consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.