Rumors Swirl that Texas-based REIT May Be a Massive Ponzi Scheme
The investment fraud lawyers at the law firm of Meyer Wilson are investigating
potential claims on behalf investors in
United Development Funding (UDF) against the brokerage firms who sold the investments to their customers.
For several years, UDF, a Texas-based non-traded real estate investment
trust (REIT), has marketed itself to retail investors on the premise that
it offers “unique and fundamentally sound investments in affordable
residential real estate.” According to UDF’s website, all
UDF investments are sold through brokerage firms. Under securities industry
rules, brokerage firms are required to conduct extensive due diligence
on any investment that a firm sells to its customers. It has been reported
that UDF has raised approximately $1 billion in funding through brokerage
firm sales to retail investors in recent years.
Wall Street Journal, federal agents raided UDF’s offices late last week, issuing subpoenas
to company executives and removing various materials from the premises.
A spokesperson for the FBI said that the agents were conducting “law
enforcement activity” but declined further comment. No charges have
yet been filed.
News of the FBI raid sent shares of UDF’s largest fund, United Development
Funding IV, plummeting 54%.
Just two days before the FBI raid,
The Wall Street Journal published an article highlighting potential problems with UDF IV’s
concentrated lending practices. According to the article, although UDF
operates in North Carolina, South Carolina and Florida, 99% of the UDF
IV fund’s portfolio consists of loans made to borrowers in Texas.
The article further states that 67% of the balance of UDF IV loans was
made to a single borrower, Texas-based Centurion American Development,
or Centurion’s affiliates.
In December 2015, a Dallas hedge fund publicly raised questions about UDF
on an Internet site. Among the allegations raised by the hedge fund was
that UDF had used new investor money to repay investors in UDF’s
earlier investment vehicles “consistent with a Ponzi scheme.”
The lawyers at Meyer Wilson have represented hundreds of Ponzi scheme investors
over the years and helped recover tens of millions of dollars on behalf
of their clients. If you invested money in United Development Funding
through the recommendation of a brokerage firm, contact the lawyers at
Meyer Wilson to discuss your options. You might be able to recover your
losses against the brokerage firm that sold you the investments.
Initial consultations are free and all of our cases are handled on a contingency fee basis.
Learn more about UDF by watching the video below.