Investors in UDF IV REIT Want Texas Federal Judge to Approve $13.5M Ponzi Fraud Settlement

Investors who placed their funds in the Texas-based United Development Funding IV real estate investment trust are asking a federal judge to approve a $13.5M REIT fraud settlement they’d reached with the company over the allegations that it had been run like a Ponzi-like scam and concealed this. The plaintiffs contend that UDV IV and its affiliates not only made false statements but also they did not disclose material facts involving business and operations.

They brought their REIT fraud case against the UDF companies three years ago, accusing the defendants of using investors’ funds from newer offering to pay investors who had gotten involved in earlier offerings. The investors, who want class certification, alleged that disclosures they were offered were misleading and lending practices lacked transparency.

Both sides eventually arrived at the $13.5M settlement—$10.5M in cash and another $3M once the REIT hits its $75M cash flow target in two years. This deal is separate from a settlement the plaintiffs reached with UDF accountants, as well as those that underwrote and sold the allegedly fraudulent offerings.

UDF IV Ponzi Allegations Lead to FBI Raid in Dallas

It was in early 2016 that the Federal Bureau of Investigation conducted a raid on United Development Funding’s offices in Dallas. The raid came after The UDF IV was hit with allegations that it had been operated like a Ponzi scam for years. UDF, meantime, tried to counter those allegations contending that it was the victim of false and disparaging allegations.

Investors have alleged that UDF IV’s alleged misconduct caused about $204.5M in damages. In July, the US Securities and Exchange Commission filed charges accusing UDF IV, UDF III, and four executives for allegedly misleading investors when they failed to disclose that distributions could not be paid and money from UDF IV, which is the newer fund, was used to pay investors of UDF III, which was the older fund.

Our Texas REIT fraud law firm represents investors that have suffered losses from investing in the UDF IV or another UDF fund. Contact one of our UDF fraud lawyers so that we can help you explore your legal options.

Investors In ‘Ponzi-Like’ REIT Seek Initial OK Of $13.5M Deal, Law360, August 24, 2018

Read the SEC Complaint (PDF)

More Blog Posts from SSEK Law Firm:

Texas REIT UDF Files Lawsuit Accusing Hedge Fund Manager of Damaging False Statements, November 30, 2017

The FBI Raids UDF IV Offices in Dallas, Texas, February 19, 2016