SEC Hits Firm With $85K Reg BI Fine

Prior to 2018, GWG's business model involved acquiring life insurance policies in the secondary market. Following several corporate transactions in 2018 and 2019 with the Beneficient Company Group, GWG reoriented its business to focus on Beneficient's business model of providing liquidity to holders of illiquid investments and alternative assets, the SEC said.

"GWG had a history of net losses and had never generated sufficient operating and investing cash flows to fund its operations," the SEC said in the orders. "As such, GWG depended on financing — primarily debt financing, such as L Bonds — to fund its operations," the SEC said.

Since 2012, GWG had raised funds for its operations "by selling corporate bonds — initially called Renewable Secured Debentures, but since 2015 known as L Bonds — to retail customers through a nationwide network of broker-dealers," according to the SEC.

On April 20, 2022, GWG filed for Chapter 11 bankruptcy.

Wolterstorff's Client

According to the SEC, in December 2021, Wolterstorff recommended a $50,000 L Bond with a five-year term to a retail client who was a 63-year old semi-retiree with a moderate risk tolerance. The client's only documented investment objective was preservation of capital, and the client specifically told Wolterstorff that "he did not want to lose his principal."

The client also used retirement funds to make the purchase.

Wolterstorff "did not know and could not explain how it was in the customer's best interest to buy an illiquid five-year L Bond when, at the time he made the recommendation, there was 'substantial doubt' about GWG's ability to continue as a going concern for the next 12 months following the filing of its 2020 Form 10-K."