United Development Funding IV Shares Fall After Allegations of Texas Ponzi Scheme
United Development Funding IV (“UDF IV”), a Texas-based real estate investment trust (“REIT”), saw its share price drop after Harvest Exchange published a post that said the REIT had been run like a Ponzi scheme for years. United Development was a nontraded REIT that became traded when it listed on Nasdaq last year under the symbol “UDF”.
In the report on the Harvest site, the anonymous author said that the UDF umbrella had traits indicative of a Ponzi scam, such as, it uses new capital to pay distributions to current investors and UDF companies and gives substantial liquidity to earlier UDF companies to pay earlier investors. The article said that once the funding of retail capital to the most current UDF stops, the earlier UDF companies do not seem able to stand on their own. This purportedly indicates that the structure will likely fail and investors will be the ones sustaining losses.
After the report by the online professional network of investors, UDF IV saw its share price plunge from $17.53 to $10.10. It later dropped further to $8.55/share.
Over $1M Awarded in Senior Financial Fraud Case Against Morgan Stanley and a Former Financial Adviser
A Financial Industry Regulatory Authority Inc. arbitration panel has awarded 92-year-old Genevieve Lenehan (“Mrs. Lenehan”) over $1M in her claim against Morgan Stanley (MS) and former Morgan Stanley advisor Justin Amaral (“Amaral”). Mrs. Lenehan accused Amaral of churning and reverse churning her account. Amaral also advised Mrs. Lenehan’s husband until his death five years ago.
It was then that he allegedly started to buy and sell closed-end funds and IPOs to garner fees. Amaral also purportedly transferred thousands of shares of GE stock that were Mrs. Lenehan’s into a wrap account. This allowed him to charge her a fee for shares that she had held since World War II. Amaral is also accused of acquiring and liquidating annuities for Mrs. Lenehan by using her signature, which he allegedly forged.
Mrs. Lenehan’s lawyer said that Amaral executed such actions without the elderly investor’s knowledge or permission and without the proper supervision by Morgan Stanley. The FINRA panel found both Morgan Stanley and Amaral liable for the losses.
NJ Broker-Dealer Settles Variable Annuities Case
Comprehensive Asset Management and Servicing Inc. will pay $475,000 to resolve allegations that the firm did not reasonably supervise variable annuities sales made by its representatives. By settling the firm is not denying or admitting to the charges.
According to a Financial Industry Regulatory Authority Inc. document, between 2/2008 and 2012, the New Jersey-based brokerage firm did not establish, keep up, and enforce procedures or a supervisory system reasonably designed to oversee variable annuity transactions. The firm is accused of not gathering specific customer data, including customers’ investment experience, goals, and their respective ages, which are needed for a satisfactory review of VA transactions to take place. The firm also purportedly failed to put in place controls so that variable annuity applications would be promptly sent to a principal for approval.
Our securities fraud lawyers represent investors nationwide who have been wrongly placed in annuities and other high cost products. Shepherd Smith Edwards & Kantas also works with investors throughout the U.S., as well as individuals and institutions based abroad with claims against financial firms or investment representatives in this country.
An anonymous short-seller called a company a ‘Ponzi-like real-estate scheme’ and the stock has crashed 65%, Business Insider, December 11, 2015
A Texas Sized Scheme Exposing the Darkest Corner of the REIT Business United Development Funding (UDF), Harvest Exchange, (PDF)
Elderly woman awarded more than $1M in churning case against ex-Morgan Stanley broker, Investment News, December 11, 2015
Broker-dealer settles variable annuity allegations for $475,000, Investment News, December 10, 2015