The Securities and Exchange Commission has revoked the registrations of three United Development Funding funds for failure to comply with periodic filing requirements. The revocations are effective as of August 13, 2020.
The funds include United Development Funding III LP, a limited partnership, United Development Funding IV (OTC: UDFI), a real estate investment trust that trades on the over-the-counter market, and United Development Funding Income Fund V, a non-traded REIT.
The SEC claims that the UDF funds failed to file any periodic reports since the third quarter of 2015. In September 2018, the SEC issued an order instituting proceedings (OIP) to determine whether it was necessary to suspend or revoke the funds’ registrations.
“Although [the UDF funds] have taken steps to return to compliance, including the hiring of a new auditor, those steps are insufficient to justify a sanction other than revocation,” the SEC stated in its opinion. “[The funds] have not filed any of the reports identified in the OIP, and they have missed additional required filings since the OIP. The record further establishes substantial reason to doubt that they will return to compliance and avoid delinquencies in the future.”
The UDF funds argued one of the reasons for the delinquencies was an alleged “short-and-distort” manipulation scheme that prevented obtaining the audited financial statements and reviews they needed for periodic reporting. UDF is currently suing Kyle Bass and his hedge fund Hayman Capital, accusing Bass of posting a series of anonymous online reports that claim that UDF operated as a Ponzi scheme – an accusation the company has vigorously denied.
United Development Funding is a family of private and publicly traded investment funds that deploy investor capital as loans to homebuilders and land developers.