The U.S. Attorney’s Office has filed charges against four executives with United Development Funding (UDF) for allegedly taking part in a years-long Ponzi scheme. In February of 2016, the FBI raided the offices of the real estate investment fund, located in Grapevine, Texas.
According to Candy’s Dirt, a North Texas Real Estate blog, two of the four executives are Highland Park residents. They live in a $6 million home near Beverly Drive, which they purchased not long before the raid took place.
Hollis Greenlaw, the CEO of UDF, and his colleagues Benjamin Wissink, Cara Obert, and Jeffrey Brandon Jester have all been charged with conspiring to deceive investors and banks.
The ten-count indictment was dropped on October 15, as first reported by Bloomberg Law.
The report alleges that from 2011 to 2015, all four defendants “did knowingly execute and attempt to execute a scheme to defraud the investing public and shareholders” by obtaining “money and property by means of materially false and fraudulent pretenses.”
Candy’s Dirt called it a complicated scheme that is difficult to explain. According to Federal Prosecutors, UDF sold and marketed investment packages with promises of 8 to 9.57% returns.
“Over more than a decade, UDF has made more than $1 billion in secured loans to residential developers under the guidance of CEO Hollis Greenlaw,” the Fort Worth Star-Telegram reported. “It is organized in a web of more than a dozen corporate entities, with UDF IV fund as its only publicly traded unit.”
Feds have stated that the firm created another investment fund to pay the first investors their dividends. According to the indictment, UDF executives borrowed money from several banks and lied about the purpose of the loans.
Kyle Bass, founder and Chief Investment Officer of Dallas-based Hayman Capital Management, told Candy’s Dirt, “They stole the savings of 20,000 people. Mom and pop investors, I have spoken to some of them. No one knows how much money is actually missing.”
According to Bass, UDF raised $1 billion with five funds. In 2015, Bass created a website and publicity network to expose the activities of UDF. The attention led to several civil lawsuits.
In retaliation, UDF filed a lawsuit against Bass and Hayman Capital, Candys Dirt said. The trial is set for May 2022. Jeff Tillotson is acting as lead counsel for both Bass and Hayman Capital Management.
“We believe strongly that evidence is going to show that postings by Mr. Bass were not only completely accurate, but the facts are much worse,” Tillotson said. “Mr. Bass views it as further vindication that his initial review and assessment is now confirmed by the authorities.”
Paul Pelletier, the lawyer for UDF, denied the charges, and all four UDF executives pleaded not guilty on October 15. The trial will start on December 6.
In a statement released by Pelletier, he said, “For the past 6½ years UDF has endured an illegal predatory short and distort attack, an unlawful FBI search and a transitory government investigation with ever-changing theories of alleged liability.”