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Texas REIT Gets Surprise Visit from FBI

Meyer Wilson

Meyer WilsonUnited Development Funding IV was recently raided by the FBI after allegations surfaced that the REIT was functioning like a Ponzi scheme.

The FBI recently conducted a raid of United Development Funding IV (UDF) in Dallas. UDF is a publicly traded real estate investment trust or “REIT” that manages both traded and nontraded REITs. In recent months, UDF’s stock price dipped a substantial 81% - this after a hedge fund claimed the company was operating like a Ponzi scheme.

UDF so far has not commented on the raid. After the REIT’s stock price dropped 81% based on the Ponzi scheme allegations, it took another hit after the raid – a near 55% drop in the company’s share price.

The company’s tailspin began last December when Harvest Exchange, a popular online network for investors, published an article that essentially alleged UDF was operating like a Ponzi scheme. Not long after, UDF responded, vehemently denying the allegations and claiming it was actually the victim of a smear campaign aimed at driving down the price of UDF’s stock.

The most recent development in the UDF saga was when a hedge fund manager, earlier this month, revealed he was shorting UDF, saying, “UDF is using new investor money to pay existing investors” which, if true, would constitute a Ponzi scheme.

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