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Articles Tagged with United Development Funding

A Financial Industry Regulatory Authority arbitration panel has awarded eight retirement investors $1,019,211 in a Texas real estate investment trust case involving three United Development Funding (UDF) REITs. United Development Funding is made up of private and publicly traded investment funds that use investor money to give loans to land developers and homebuilders.

According to the claimants, IMS Securities, a Houston-based brokerage firm that is no longer in operation, and its chief executive Jackie Divono Wadsworth recommended through a third party that investors purchase retirement accounts in the:

  • United Development Funding II

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.

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