United Development Funding Accused of Ponzi-like Scheme

United Development Funding IV stock plummets

Hedge fund manager Kyle Bass, of Dallas-based Hayman Capital, revealed Friday his short position on a website entitled UDF Exposed, and claims he is shorting the company.

According to Yahoo Finance, UDF IV, the company’s only publicly traded REIT, plummeted more than 30% after Bass’s announcement, which accused the company of orchestrating a $1 billion “Ponzi-like” scheme.

Yahoo Finance reported that Bass accused UDF of using money from one fund to “bail out” another while “using new investor money to pay existing investors.” Bass went on to call UDF “a billion dollar house of cards” that “is now on the verge of collapse.”

This isn’t the first time UDF has been accused of operating like a Ponzi scheme. Back in December 2005 an anonymous post on a popular investment website made similar allegations causing UDF IV to drop dramatically (Read more, here).

According to Yahoo Finance, we now know that anonymous post was Bass’s Hayman Capital.

Unfortunately for some investors limited partnerships and real estate investment trusts (REIT) sponsored by UDF were not as “safe” as their broker led them to believe.

In general, limited partnerships and REITs lack liquidity and are inherently risky. These types of products are sophisticated complex investments that are better suited for institutional investors or investors who can afford total loss of their capital investment.

The White Law Group is investigating the liability some brokerage firms may have for recommending clients purchase UDF investments, including:

• United Development Funding
• United Development Funding II
• United Development Funding III
• United Development Funding IV
• United Development Funding V
• United Development Funding Land Opportunity Fund Investors
• United Development Funding Land Opportunity Fund

If a brokerage firm makes unsuitable investment recommendations or fails to adequately disclose the risks associated with an investment they may be liable for investment losses through a FINRA arbitration.

To determine whether you may be able to recover investment losses incurred as a result of United Development Funding investment, please contact The White Law Group at 888-637-5510 for a free consultation.

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 Franklin, Tennessee. For more information on the firm, visit whitesecuritieslaw.com.