Erez Law is currently investigating brokers at Cetera Financial Specialists LLC (CRD# 10358), Investors Capital Corp. (CRD# 30613), VSR Financial Services, Inc. (CRD# 14503), Berthel, Fisher & Company Financial Services, Inc. (CRD# 13609), Sun America (previously registered investment advisor firm) or other firms for losses from investments in United Development Funding IV (UDF). It is alleged that UDF used new investor money to pay existing investors in a Ponzi-like scheme.
UDF is a public Maryland real estate investment trust (REIT) that invests in secured loans for the acquisition and development of residential real estate in desirable markets. According to their website, “United Development Funding IV provides investors with an opportunity to diversify their portfolios with unique and fundamentally sound investments in affordable residential real estate.” UDF generates interest income by investing in secured loans and generating profits from those investments in the residential real estate market. It was listed on the NASDAQ in June 2014.
In February 2016, the FBI raised UDF and seized documents from its Grapevine, Texas office in connection with an investigation into Kyle Bass, founder of Hayman Capital Management, who is alleged to short UDF and use investor money to pay existing investors. This is commonly known as a Ponzi scheme, which is a form of investment fraud in which a company finances its payout of returns to investors using money paid by new investors. To keep the scheme afloat, these firms work to attract new money by promising investors high returns with little or no risk.
According to the Securities and Exchange Commission (SEC), UDF defaulted on a $35 million loan by Waterfall Finance 4, and UDF entered into a forbearance agreement in March 2016 giving them two months to pay back the loan. Following this news, stock prices fell and trading was suspended, according to a press release issued by the company. In November 2016, UDF authorized a cash distribution of $0.08 per share payable to shareholders of record.
Pursuant to FINRA Rules, brokerage firms and financial advisors are responsible for performing due diligence on investments prior to selling them. Therefore, Cetera Financial Specialists LLC, Investors Capital Corp., VSR Financial Services, Inc., Berthel, Fisher & Company Financial Services, Inc., Sun America and other firms may be liable for investment or other losses suffered from the sale of United Development Funding IV.
Erez Law represents investors in the United States who seek to recover damages from investments in United Development Funding IV (UDF) with a broker-dealer firm, such as Cetera Financial Specialists LLC, Investors Capital Corp., VSR Financial Services, Inc., Berthel, Fisher & Company Financial Services, Inc., Sun America and other firms for improper sale of UDF investments and losses suffered as a result of those investments. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.