The FBI is reportedly investigating a housing development firm in Texas following a raid earlier this week. This comes as the firm was accused of operating as a Ponzi scheme and suspected of laundering money. According to reports, the firm has apparently “financed more than $1 billion in residential development across Texas”. If the claims transpire to be true, this could be one of the biggest cases of fraudulent activity in the region, especially for customers of the Texas-based housing financial firm.
The claims recently came to light when a Texas hedge fund manager launched a website detailing claims that the company uses “cash from investors to repay existing investors.” In all, the company is believed to be misleading investors and misusing investment, which has led to an investigation by the Federal Bureau of Investigation. That being said, the firm has hit back, posting a direct message from its CEO on their website, branding the accusations as misleading and false. United Development Funding is said to be co-operating fully with the FBI investigation are now waiting to see the outcome of that investigation.
According to reports, the FBI raided the headquarters of United Development Funding, which is one of the largest sponsors of real-estate investment trusts.
The raids have sent share prices in the company tumbling by up to 54 percent before trading was halted on Thursday. Tom Class, a special agent in charge of the FBI’s Dallas division, said that FBI agents are conducting “law enforcement activity” at United Development Funding’s office. However, neither Class nor the FBI were able to comment on the case further.
The FBI is believed to have issued subpoenas to the executives of the company and also seized several materials from the premises, according to someone close to the matter. However, both tend to be pretty standard procedure in a case of this type.
A spokesman for United Development Funding has refused to comment.
If you hadn’t already heard of UDF, they’re a pretty big name in not only Texas but also North Carolina, South Carolina, and Florida. That being said, 99 percent of their funding portfolio consists of loans made to borrowers in Texas. That’s according to the company’s most recent quarterly filing. In terms of UDF’s own website, they have stated that “we operate in select markets across the country.”
United Development Fund began as a nontraded REIT in 2009 before eventually listing shares in 2014. However, 67 percent of the balance of its loans are believed to have been made to a single borrower. Many have commented that UDF’s financial situation is an incredibly muddy one, and the company haven’t done a very good job at keeping it clear.
In all, FBI raids of companies like United Development Fund are only becoming more and more frequent. It’ll now be interesting to see what course of action the FBI takes next in this investigation and whether the company’s directors will face legal challenges. Either way, United Development Fund has already suffered a massive loss as a result of this investigation, especially when you simply take a look at that aforementioned drop in their share prices.
UDF are undeniably one of the biggest names in investment in both Dallas and the Texas region as a whole. Their downfall could spark repercussions for the general economy of the region.
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