United Development Funding IV Lawsuits

Egan-Jones Recommends NexPoint’s Director Nominees for UDF IV’s Board at December 10 Meeting

NexPoint Real Estate Opportunities, LLC has reportedly announced that Egan-Jones Proxy Services is advising shareholders of United Development Funding IV (UDF IV) to vote for NexPoint’s nominees for the board of directors, according to Fact Right.  Egan-Jones also recommends shareholders withhold votes for the current trustees.

This annual meeting, set for December 10, 2024, is the first one UDF IV has held in eight years and is being conducted under a court order. The meeting follows significant legal issues within UDF IV, including the 2022 criminal fraud convictions of former CEO and other executives.

NexPoint has reportedly outlined its concerns and proposals for UDF IV during an October 2024 webinar. Among its key points:

• NexPoint reportedly plans to vote against re-appointing Bodwell Vasek Wells DeSimone LLP as UDF IV’s independent auditor, citing past issues with the company’s previous auditor, Whitley Penn LLP. Several individuals at Whitley Penn faced penalties from the Public Company Accounting Oversight Board due to their audit work for UDF IV and its affiliates.
• UDF IV has not filed any financial reports with the SEC since the third quarter of 2015, according to the SEC. Additionally, the SEC reportedly revoked the registration of UDF IV’s securities in 2020.

NexPoint and its affiliates have reportedly held an activist stance on UDF IV since July 2020, after first investing in 2017. They now collectively own over 6% of UDF IV’s common stock.

UDF IV Delisted, Fails to File Financial Reports

United Development Funding IV, a publicly traded real estate investment trust, has been embroiled in scandal over the past few years. 

UDF IV previously traded on NASDAQ under the ticker “UDF” from June 2014 until December 2015. The company was delisted in October 2016 for failing to file its 2015 annual financial reports and subsequent quarterly reports with the SEC. 

On Sept. 27, 2021, United Development Funding IV announced that it recommends Trust shareholders reject the eighth extended unsolicited tender offer made by hedge fund NexPoint Strategic Opportunities Fund to purchase all Trust common shares for $1.10 per share. 

Shares of UDF IV were originally sold for $20 per share.  

The SEC launched an investigation into United Development Funding IV in 2014 after a hedge fund manager accused the REIT of a Ponzi-like scheme. Kyle Bass, hedge fund manager and founder of Hayman Capital Management, publicly accused UDF IV of operating a “Ponzi-like real estate scheme,” in 2016, by using new investor money to pay existing investors. Hayman reportedly held a short position in the company’s common stock. 

In February of 2016, United Development Funding IV disclosed that it received a grand jury subpoena. The FBI seized documents and computers in a raid of the UDF corporate offices in Grapevine, Texas. UDF has vehemently denied the Ponzi allegations and has since sued Hayman Capital and Bass. 

Potential Lawsuits to Recover Investment Losses

Investors who purchased UDF investments in reliance upon the recommendation of a broker-dealer firm may also be eligible to pursue claims in arbitration against the firm and seek compensation for any losses they suffered as a result of those investments.  These claims are distinct from the class action filed directly against UDF and could be pursued concurrently. 

Brokers have a fiduciary duty to perform due diligence on any investment and to ensure that investment recommendations are consistent with their client’s age, net worth, risk tolerance, investment experience and objectives, risk tolerance. 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 Financial Industry Regulatory Authority (FINRA) operates the largest securities dispute resolution forum in the United States, and has extensive experience in providing a fair, efficient and effective venue to handle a securities-related dispute. 

Free Consultation

If you have suffered investment losses, the securities attorneys at The White Law Group may be able to help you. Please call 888-637-5510 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. The firm represents investors in FINRA arbitration claims throughout the country.