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L Bonds are a variety of high-yield debt that aim to pay those fat coupons by using the proceeds from their sale to buy up life insurance policies from old people and then wait for them to die, hopefully before the policies expire and in a way that triggers the payout. Ghoulish, yes, but not the first time an alternative asset manager has sought to profit from death. And, anyway, for the purposes of this post, you don’t actually need to know any more about them. In fact, you don’t even need to know what we just told you. All you need to know is that if you are in the business of selling L Bonds, ironically to the sort of people from whom you might also buy life insurance policies (i.e., the elderly), it is very bad indeed for business if you have to stop selling L Bonds.

GWG was forced to stop selling additional L Bonds because of accounting problems that delayed the filing of its 2020 annual report, as well as the resignation of its auditor. That cut off the company’s access to capital markets, preventing it from making interest payments to L Bond holders starting in January, according to [CFO Timothy] Evans’s [bankruptcy] declaration…. He said GWG would use the breathing spell from creditor action to try to negotiate a restructuring settlement….

And also, no doubt, to ponder the fate of that other morbid money manager.

Aside from the SEC investigation, GWG has also been facing litigation by L Bond holders alleging it misused bond proceeds and failed to disclose SEC probes that could have affected their investment decisions.

Asset Managr GWG Files for Bankruptcy as Risky Bond Sales Dry Up [WSJ]

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