Grapevine-based United Development Funding IV may face an enforcement action from the Securities and Exchange Commission regarding alleged violations of federal securities laws, the company said Tuesday.
Also, the real estate investment trust, whose stock has not traded since the FBI raided its offices in February, disclosed that it was informed by the Nasdaq that its shares will be delisted for not filing timely annual and quarterly financial reports.
UDF, a big lender to area developers, has been in crisis mode since a Dallas hedge fund accused the company of operating a “Ponzi-like real estate scheme” across its multiple funds. The hedge fund, Hayman Capital Management run by Kyle Bass, began shorting UDF stock anonymously late last year and later laid out its case on a website called udfexposed.com.
In a news release, the company said the trust and some individuals had received Wells notices regarding the potential SEC action.
“A Wells Notice is not a formal allegation or a finding of wrongdoing, but is a preliminary determination by the Staff that it may recommend to the SEC that a civil enforcement action or administrative proceeding be brought against the recipient,” the company said. It added that the trust intends to submit a letter explaining why it believes that an enforcement action is not warranted.
Over more than a decade, UDF made more than $1 billion in secured loans to residential developers under the guidance of CEO Hollis Greenlaw. It is organized in a web of more than a dozen corporate entities, with the UDF IV fund as its only publicly traded unit.
The company has called the accusation from Hayman “misleading.” It previously disclosed that it had been subject to a fact-finding investigation by the SEC since 2014.