December 14, 2015 Comments (0) Blog, Securities Fraud

United Development Fund IV Share Price Plummets

(Last Updated On: February 8, 2016)

The White Law Group is investigating potential claims involving United Development Fund IV (UDF).

Launched in 2008, United Development Fund IV (UDF) was a non-traded REIT sold for $20.00 per share. Unfortunately for investors, it appears the stock has not recovered from rumors last week that UDF IV operates like a Ponzi scheme. The share price for UDF opened today at $8.98. The REIT made its public debut on the Nasdaq in June 2014.

According to Investment News, share prices plummeted more than 40% following an anonymous post published on a popular investor website, Harvest Exchange, titled “A Texas-Sized Scheme: Exposing the Darkest Corner of the REIT Business, United Development Funding.”

The signature of a classic Ponzi scheme is paying purported returns to existing investors from funds relieved from new investors. The Harvest’s anonymous post highlighted that it is allegedly not an uncommon practice for non-traded REITs to pay existing investors returns from new investors.

Using UDF as an example, the Harvest post wrote “The UDF umbrella exhibits characteristics emblematic of a Ponzi scheme: (1) new capital, both equity and debt, is used to fund distributions to existing investors; (2) subsequent UDF companies provide significant liquidity to earlier vintage UDF companies, allowing them to pay earlier investors; and (3) if the funding mechanism funneling retail capital to the latest UDF company is halted, the earlier UDF companies do not appear to be capable of standing alone and the entire structure will likely unravel, with investors left holding the bag.”

In response to Harvest’s post, UDF is pointing the finger on a hedge fund. According to a recent 8-K filing, UDF believes they have been “attacked by a hedge fund or funds,” and believe the hedge fund(s) “built a significant short position in UDF IV with the intention of unlawfully manipulating the price of UDF IV shares.”

Regardless of the truth, many investors are taking the hit. If you were lead to believe a REIT investment, like United Development Fund IV,  was “low risk” or “safe,” the broker that sold you the investment may be liable for making misleading investment recommendations.

To discuss your litigation options with a securities attorney, please call The White Law Group at (312)238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.