Management of real estate investment trust United Development Funding IV, a hedge fund accused of operating as a Ponzi scheme, has been subpoenaed to turn over company documents to a grand jury.
Last week, the FBI raided the REIT’s offices outside of Dallas. While performing their search, “law enforcement officers served executive officers of the trust and certain other employees of the trust’s advisor and its affiliates” with the subpoenas for company documents, according to a filing with the SEC.
UDF IV share prices plummeted after the news of the FBI raid last week. Shares fell nearly 55% during trading on Thursday to $3.20 per share. That day, NASDAQ told UDF it was suspending trading of the Texas REIT.
In the SEC filing, the company said that it did not “believe that it, its officers or the employees of its advisor and its affiliates have violated any laws or regulations, and the trust intends to cooperate fully with the government’s investigation.”
UDF and affiliated companies, including a nontraded REIT UDF V, with $55.6 million in assets have been highly monitored since December after an investor website published a report that alleged the Texas REIT of operating like a Ponzi scheme for years.
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.”
If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.