FBI agents raided the offices of United Development Funding, suggesting a criminal investigation is now underway into the real estate firm. The SEC previously launched its own investigation into United Development Funding, whose real estate investment trust (REIT) trades under the UDF symbol.
According to KXAS-TV, UDF has financed over $1 billion in residential development across Texas in what some allege is a Ponzi scheme, with the Hayman Capital Management hedge fund stating that, "UDF exhibits characteristics consistent with a Ponzi scheme." Whether UDF is or was a Ponzi scheme remains to be seen.
In December 2015, The Motley Fool noted that UDF shares plunged 27.3% after a short-seller first accused the REIT of operating in a way similar to a Ponzi scheme. That report cited issues with UDF's financial filings and business model. For instance, "profits may be overstated, as the company has not made 'any provision for loan losses despite a material outstanding balance of past due loans.'"
ValueWalk summed up the Hayman Capital report thusly: "Total Ponzi Scheme, Worth Zero."
UDF shares prices on NASDAQ plunged another 55% on February 18 in the wake of the FBI raid as shares that were worth 6.83 at 1:15pm fell to 3.20 by 1:32pm. Trading was then halted.
If you have invested with a broker or financial adviser in the United Development Funding (UDF) REIT, or any UDF prodcuts, and such advice or investment activity has proven harmful to your interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.