A year ago, real estate investment trust (“REIT”) United Development Funding IV was accused of operating as a Ponzi scheme. Since then the FBI has raided its offices, the REIT’s shares dropped to $3.20 before being delisted by the NASDAQ, and the SEC issued a Wells notice against it. As the year comes to an end, investors still have little information on the future of the UDF REITs.
UDF manages four REITs, which have a combined total of $1.3 billion in assets, but they have not issued financial reports since November 2015. UDF IV, no longer listed on the NASDAQ, is currently trading on the OTC markets. The other three REITs are non-traded, meaning they are not traded on any public exchange.
UDF III issued a letter to shareholders last week that detailed the events of last year, including what it calls “the attack” last December by Hayman Capital, a hedge fund with a short position in UDF IV shares that accused the REIT of operating as a Ponzi scheme. The note, however, ended on a note of reassurance. None of the other REITs have issued any such letter, leaving investors to wonder about the state of their investments.
What is clear though is that the REITs continue to blame Hayman Capital for their shortcomings and plan on leaving investors in the dark. They have not filed financial reports in over a year and have shown no signs of doing so any time soon.
UDF IV, with $684 million in assets according to SEC filings, closed December 12, 2016 at $3.77 a share. UDF-branded REITs and private deals were high yield offerings, promising investors returns of 8% to 10%.If you or someone you know has lost money as a result of investing in any of the UDF REITs, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.