UDF Executives Sentenced to a Combined 20 Years
The UDF executives were found guilty of 10 counts each of investment fraud and misleading investors.
Four United Development Funding executives were sentenced to a combined 20 years in federal prison for fraud, according to U.S. Attorney for the Northern District of Texas Chad E. Meacham.
In January 2022, each UDF executive was found guilty of 10 counts including conspiracy to commit wire fraud affecting a financial institution, conspiracy to commit securities fraud, and securities fraud. The Federal Bureau of Investigation’s Dallas Field Office conducted the investigation concerning the REIT.
Chief executive officer Hollis Greenlaw was sentenced to seven years for all 10 counts. Partnership president Benjamin Wissink and chief financial officer Cara Obert were sentenced to five years each; and asset management director Jeffrey Jester to three years. U.S. District Judge Reed C. O’Connor also ordered Greenlaw, Wissink, and Obert to pay $50,000 each. None of the four was ordered to pay restitution.
According to evidence presented during the trial, the defendants orchestrated a scheme to mislead investors and the SEC about their funds’ performance. The Dallas Morning News reported government attorneys testifying that Greenlaw was the scheme’s “mastermind.” “UDF executives comingled funds, shuffling money from one fund to another without disclosing their actions to investors or regulators,” Meacham said following the verdict.
Founded in 2003 in Grapevine, Texas, UDF utilized a family of five funds – UDF I, II, III, IV, and V – to invest in various residential real estate developers and private homebuilders.
When developers failed to repay money borrowed from one fund, triggering multimillion-dollar shortfalls, the defendants transferred money out of another fund to pay distributions to the original fund’s investors, all without disclosing the transfers to the SEC and the investing public.
The case dates to 2016, when the FBI raided the UDF offices in response to concerns raised by Dallas-based Hayman Capital Management about the company’s operations. Hayman Capital’s Kyle Bass dubbed the actions a “Ponzi-like scheme” and short-sold its stock; he said he later earned more than $30 million on the UDF trades.
In July 2018, UDF agreed to pay $8.3 million to settle similar charges brought by the SEC without admitting to wrongdoing.
