Investors have filed a class action securities case claiming that the Texas nontraded real estate investment trust United Development Funding IV (NASDAQ:UDF) and certain of its officers violated federal securities laws. The complaint come a month after the Harvest Exchange website published a report accusing the Company of running a Ponzi-like scam. The UDF umbrella is accused of raising capital to bail out its earlier vintage entities.
On December 10, 2015, the day that the report went out, UDF’s shares dropped significantly. The Company then put out a press release disclosing that its UDF IV and UDF III have been cooperating for nearly two years with the U.S. Securities and Exchange Commission, which has been conducting a non-public probe since early 2014. Following that announcement, Company shares fell even further, negatively impacting investors.
The Texas securities case accuses the defendants of, from June 4 – December 10, 2015, failing to disclose that:
· New UDF companies gave older UDF companies substantial liquidity, letting them pay earlier investors.
· These earlier UDF companies wouldn’t have been able to stand alone if the mechanism used to channel retail capital to the newest UDF company had been stopped.
· The UDF IV gave liquidity to UMT, UDFI, and UDF III, and this allowed the alleged securities scam to continue.
· The SEC was investigating the nontraded REIT.
The plaintiffs contend that the failure to make these disclosures was misleading and false.
Shepherd Smith Edwards and Kantas, LTD LLP is a Texas securities fraud law firm. Please contact our nontraded REIT fraud lawyers if you invested in the UDF IV or any of the other UDFs and sustained losses. Your initial consultation with us is a no obligation session.
A Texas Sized Scheme Exposing the Darkest Corner of the REIT Business United Development Funding (UDF), Harvest Exchange, (PDF)