United Development Investment Fraud Likely to Lead to Investor Claims
A series of independent broker-dealers, including IMS Securities, Inc., Berthel Fisher & Co. Financial Services, Inc., Centaurus Financial Inc., and VSR Financial Services, Inc. are likely to face an increasing number of investor arbitration claims in the coming months related to the United Development Funding (“UDF”) fraud. UDF is now under investigation by both the SEC and the FBI.
On February 18, 2016, the FBI raided the Grapevine, Texas offices of UDF. The criminal investigation of UDF follows allegations by Hayman Capital Management Fund founder Kyle Bass’ allegations that UDF is nothing more than a Ponzi scheme. According to Bass, “UDF is using new investor money to pay existing investors” all while “preying on ‘Mom and Pop’ retail investors. Following the FBI raid, NASDAQ announced that it was halting all trading in UDF IV (with the last listed price of $3.20) until UDF fully satisfied NASDAQ’s request for additional information. On March 21st, NASDAQ informed UDF that it would be delisted as of May 16, 2016 based upon UDF’s failure to timely file its Annual Report with the SEC.
Broker-dealers had a duty to conduct adequate due diligence on investment products such as UDF before recommending such investments to their customers. In fact, FINRA has repeatedly reminded its member firms of their duty to conduct such due diligence. If you have investment losses related to UDF, please contact Rob Linkin at Duggins Wren Mann & Romero to discuss your rights. Rob can be reached at (512) 744-9300 or rlinkin@dwmrlaw.com.