The United Development Funding, a beleaguered Texas real estate investment trust accused of running a $1B Ponzi-like scam, is suing a hedge fund manager for the allegedly “false and disparaging” statements that led to the fraud allegations. The REIT came under fire two years ago after an investor website issued a report accusing UDF IV of being run like a Ponzi scam. For the last two years, our Texas securities fraud lawyers at Shepherd Smith Edwards and Kantas LTD, LLP has been fielding calls from investors who suspect they may have suffered financial losses from investing in UDF Funds.
According to UDF’s complaint, filed in Dallas County, hedge fund manager Kyle Bass and his Hayman Capital Management are the ones that anonymously published the Ponzi allegations online and then later on a proprietary site. They allegedly did this to damage the UDF Funds.
In its filing with the US Securities and Exchange Commission about the complaint, the REIT accused the defendants of engaging in “false and disparaging statements,” including that: the UDF Funds were part of a Ponzi fraud, they were unable to run their own business, had insolvency problems that made their shares “worthless,” their real estate developments that were “not genuine,” and they “misappropriated” investors’ funds. The filing countered that the UDF Funds were “successful” and had actual real estate developments. The REIT claims that because Bass had set up a “large short position” in the Texas REIT before publishing the false allegations, he and his company “profited” from the damages wreaked by their claims.
Bass had a short position in the REIT. Once he disclosed this news, United Development Funding shares plunged in price. In response to this lawsuit, the hedge fund manager claims it is meritless.
From ’09 to ’13, UDF IV raised investor monies. The nongraded REIT was listed on Nasdaq but has since been delisted.
After the Ponzi scam allegations came to light, in early 2016 the Federal Bureau of Investigation raided UDF’s offices in Dallas. This also led to a drop in the UDV IV’s price. Late last year, the US Securities and Exchange Commission sent a Wells notice notifying the REIT that the regulator’s staff would likely pursue an enforcement case against it.
Texas REIT Fraud
If you are an investor that has lost money in the wake of the allegations that UDF IV was being run as a Ponzi scam, please contact our Texas nontraded REIT fraud lawyers today. Shepherd Smith Edwards and Kantas, LTD LLP represents investors throughout the state. Our REIT fraud attorneys also represent investors throughout the US, as well as investors based abroad with securities claims against brokerage firms, investment advisers, and money managers in this country. Your initial case consultation with us is a free, no obligation session.
In other Texas securities news, the state’s Securities Board has published on its website an article warning the public about the top 10 threats against investors, including: unregistered investments, cyberattacks, risky oil and gas investments, suspect promissory note investments, complex currency trades, volatile cryptocurrencies, private placement offerings offered to unaccredited investors, overseas investments that aren’t regulated, and real estate investments touting low risks that actually may be illiquid.
As the Texas State Securities Board noted, thousands of investors in the state fall victim to investor fraud every year. If you suspect that your investment losses may be due to fraud, reach out to our Texas securities law firm today.
Frequently-Sued Texas REIT Sues Kyle Bass, DealBreaker, December 1, 2017
Top 10 Investor Threats (Just In Time for the Holidays), SSB.Texas.Gov, November 29, 2017
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Credit Suisse Resolves NY Regulator’s Forex Rigging Probe for $135M, Institutional Investor Securities Blog, November 15, 2017