FBI raids offices of Texas REIT

FBI raids offices of Texas REIT
United Development Funding IV's stock price has dropped 81% in the past two months after a hedge fund alleged it was operating like a Ponzi scheme
MAY 24, 2016
The FBI on Thursday raided the suburban Dallas offices of a publicly traded real estate investment trust, United Development Funding IV. The firm, which also manages nontraded REITs, has seen its stock price fall 81% in the past two months after a hedge fund alleged it was operating for years like a Ponzi scheme. “The FBI is lawfully present and conducting law enforcement activity” at the UDF offices, said FBI spokeswoman Allison Mahan. A UDF spokeswoman, Stacey Dwyer, did not return a phone call on Thursday to comment. The company is a mortgage REIT that lends money to develop properties. The FBI's presence at UDF headquarters further decimated the company's share price, which fell almost 55% during trading on Thursday to $3.20 per share after it was reported locally that the FBI agents were carrying boxes out of the company's headquarters. In December, UDF shares were trading at $17.20. UDF IV had total assets of $684 million, the vast majority of which, $513.2 million, were notes receivable, according to its quarterly report from November. Notes receivable for related parties was $69.6 million, according to the report. UDF IV was knocked on its heels in December when an investor website published a report that alleged that the REIT, which was a nontraded REIT and then listed in 2014, operated for years like a Ponzi scheme. The company's management fired back, claiming in a filing with the Securities and Exchange Commission that the REIT was the victim of a type of securities trading scheme known as a “short and distort,” in which an investor builds up a significant short position in a stock “with the intention of unlawfully manipulating” its shares. UDF also disclosed in December that it had been the subject of a fact-finding investigation by the SEC since April 2014. Earlier this month, hedge fund manager Kyle Bass revealed that he was shorting UDF. “UDF is using new investor money to pay existing investors,” he wrote. “UDF Management is misleading investors and is preying on 'Mom and Pop' retail investors.”

Latest News

Stratos Wealth Holdings closes 11 acquisitions in push for advisory scale
Stratos Wealth Holdings closes 11 acquisitions in push for advisory scale

RIA aggregator adds $4.8 billion in client assets across seven states as demand grows for alternatives to traditional succession models.

Beyond wealth management: Why the future of advice is becoming more human
Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

Shareholder sues FS KKR Capital board, alleges NAV and dividend cover-up
Shareholder sues FS KKR Capital board, alleges NAV and dividend cover-up

Shareholder targets FS KKR Capital's directors over alleged portfolio valuation and dividend missteps.

UBS loses $1.2 million arbitration claim linked to variable annuities and margin
UBS loses $1.2 million arbitration claim linked to variable annuities and margin

UBS has a history of costly litigation stemming from the sale of volatile investment products.

'We are monitoring the situation,' SEC says of private funds
'We are monitoring the situation,' SEC says of private funds

New director David Woodcock puts firms on notice over fees, conflicts, and liquidity risk as private credit shows signs of stress.

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

SPONSORED Durability over scale: What actually defines a great advisory firm

Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline