United Development Funding REITs Securities Fraud Investigation

Investigating Potential Claims involving United Development Funding REITs

Have you suffered losses investing in United Development Funding REITs? If so, The White Law Group may be able to help you by filing a FINRA Arbitration claim against the brokerage firm that sold you the investment.

The four Texas REITs have combined assets of $1.3 billion but have been inconsistent with filing of financial reports since November 2015. Three are nontraded REITs while the fourth, UDF IV, was delisted by Nasdaq last fall and is currently trading on the OTC markets, according to Investment News.

UDF IV was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate.

The company was delisted from trading on NASDAQ in October 2016 and is still under investigation by the Securities and Exchange Commission. This follows the Securities and Exchange Commission’s began investigation into United Development Fund IV in 2014 after famed hedge fund manager Kyle Bass alleged that UDF was using new investor money to pay existing investors, therefore perpetuating a multimillion-dollar Ponzi-like scheme. UDF denied any wrongdoing.

United Development Funding REITs Class Action Lawsuit

In April, several of the United Development Funding REITs pushed a Texas federal court to toss the proposed class action alleging they operated this “Ponzi-like” scheme to prop up failing funds. The REITs claimed investors should have known that their money could be transferred to the funds’ affiliates.

The United Development Funding entities tried to dodge allegations that they misrepresented the fact that money invested into new REITs was funneled into older, distressed REITs. They argued that multiple disclosures made it clear that the cash could flow into related entities, according to Law 360.

“Given the disclosures that were actually made in UDF IV’s public filings, the ‘Ponzi-like scheme’ evaporates,” the real estate funds said.

A proposed class sued a slew of United Development Funding entities in March 2016, alleging the funds UDF IV and UDF V used money raised in new offerings to pay investors in earlier offerings by utilizing opaque lending practices and misleading disclosures. The UDF entities “used a complex network of related entities” to carry out the scheme, according to the complaint.

But the UDF groups argued that these allegations mischaracterize its public statements “to create an impression of nefarious conduct,” saying multiple disclosures make it unmistakably clear that money in UDF IV could flow into affiliates.

Recovery of Investment Losses

The White Law Group continues to investigate the liability brokerage firms may have for selling United Development Funding REITs.

If a broker overlooks suitability requirements, investors may have an actionable claim to recover their losses in a product in a claim through FINRA dispute resolution. The White Law Group has handled dozens of FINRA arbitration claims against brokerage claims involving those firms improper sale of United Development Funding REITs, including UDF III and UDF IV.

Brokers have a fiduciary duty to perform due diligence on any investment and to insure that investment recommendations are consistent with their client’s age, net worth, risk tolerance, investment experience and objectives, risk tolerance.

For more  detailed information on The White Law Group’s Investigation of United Development Funds, see United Development Fund IV (UDF IV) Delisted by NASDAQ.

For a free consultation with a securities attorney, please call The White Law Group at 1-888-637-5510.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, please visit our website at www.WhiteSecuritiesLaw.com.

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