Investor Alert — Texas Broker Subject of Complaint over GWG L Bonds
Giarrusso Law Group LLC continues its investigation into inappropriate recommendations by certain financial advisors to invest in L Bonds. If you have invested in so-called L Bonds as issued by GWG Holdings, Inc. (GWG) — on the recommendation of a financial advisor who failed to inform you of the many risks associated with GWG L Bonds or otherwise lacked a reasonable basis for the investment recommendation — you may be able to recover your losses through securities arbitration before the Financial Industry Regulatory Authority (FINRA). Attorney Michael Giarrusso is currently representing aggrieved investors in GWG L Bonds, many of whom were retired or semi-retired retail investors seeking safety, income, and liquidity in their investments.
According to public disclosures, Jonathan E. Ellefson (Ellefson, CRD No. 1625977) of Harker Heights, TX, has been the subject of a customer complaint involving the sale of GWG L Bonds. Ellefson is a longtime securities industry employee with 35 years of experience in financial services. Since 1992, Ellefson has been affiliated with Intervest International Equities Corporation (Intervest) of Harker Heights, TX. Over the course of his career, Ellefson has been named or otherwise involved in five customer disputes, of which two disputes are pending. Most recently, in October 2022, a customer initiated a complaint alleging damages of $538,000 for purported “breach of fiduciary duty, negligent misrepresentations, gross negligence, violation of FINRA rules, negligent supervision, breach of contract and fraud.”
GWG defaulted on bond payments to its L Bond investors in early 2022. Subsequently, in April 2022, GWG filed for Chapter 11 bankruptcy protection. Unfortunately, many unsophisticated and uninformed retail investors nationwide were steered into investing in GWG L Bonds by their financial advisor. Investors acquired their interest in GWG L Bonds through private placement offerings, which were discontinued by GWG in 2021. Private placement investments are very risky investments due to their nature as unregistered securities offerings. Unlike well-known stocks that are publicly traded, and therefore must meet stringent registration and reporting requirements as set forth by the Securities and Exchange Commission (SEC), private placements do not have the same regulatory requirements and oversight. Typically, private placements are sold through an exemption from registration pursuant to Regulation D (Reg D) of the Securities Act of 1933.
Investing in a Reg D private placement is risky because investors in such unregistered securities will usually only receive very limited information (often provided through a private placement memorandum (PPM), or similar offering document). In some instances, investors in private placements may receive unaudited financials, or an overly optimistic growth forecast, which may have been prepared by a third-party firm hired by the investment sponsor. Such lack of information and the potential for conflicts of interest makes investing in private placements risky and complex.
Brokerage firms like Intervest, and by extension their financial advisors, have a duty to perform adequate due diligence on any investment recommended to customers, including private placements offered under Reg D. Further, financial advisors have a duty to disclose the risks associated with such an investment, as well as conduct a suitability analysis to determine if the investment meets an investor’s stated investment objectives and risk profile.
Investors who have suffered losses with Jonathan Ellefson, or another financial advisor who recommended GWG L Bonds, may contact our office by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a free, confidential consultation to learn more about their legal rights. The attorneys at Giarrusso Law Group LLC have extensive experience with handling all manner of claims on behalf of investors who have been solicited to invest in illiquid and speculative private placements such as GWG L Bonds.