United Development Funding IV (NASDAQ: UDF) Investor Securities Class Action Lawsuit 12/21/2015

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Company Name(s): 
United Development Funding IV
Case Name: 
United Development Funding IV Shareholder Class Action Lawsuit 12/21/2015
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: UDF
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
12/21/2015
Class Period Begin: 
06/04/2014
Class Period End: 
12/10/2015
Court of Filing: 
U.S. District Court for the Northern District of Texas
Deadline To File for Lead: 
02/19/2016
Summary: 

March 14, 2016 - Lead plaintiff and lead counsel were appointed and all cases were consolidated.

February 19, 2016 - Lead plaintiff motions were filed.

December 21, 2015 - An investor in shares of United Development Funding IV (NASDAQ: UDF) filed a lawsuit in the U.S. District Court for the Northern District of Texas over alleged violations of Federal Securities Laws by United Development Funding IV and certain of its officers in connection with certain allegedly false and misleading statements made between June 4, 2014 and December 10, 2015.

According to the complaint the plaintiff alleges on behalf of purchasers of United Development Funding IV (NASDAQ: UDF) common shares between June 4, 2014 and December 10, 2015, that the defendants violated Federal Securities Laws. More specifically, the plaintiff claims that between June 4, 2014 and December 10, 2015 the defendants made allegedly false and/or misleading statements and/or failed to disclose that subsequent UDF companies provide significant liquidity to earlier vintage UDF companies, allowing them to pay earlier investors, that if the funding mechanism funneling retail capital to the latest UDF company were halted, the earlier UDF companies would not be capable of standing alone, and the entire structure would likely crumble with investors left holding the bag, that UDF IV provided liquidity to UDF I, UMT and UDF III, among other affiliates, further exacerbating the problem and perpetuating the scheme, that, as such, Defendants were operating a Ponzi-like real estate investing scheme, that the Company was being investigated by the SEC, and that, as a result of the foregoing, Defendants’ statements about UDF IV’s business, operations, and prospects, were false and misleading and/or lacked a reasonable basis.

On December 10, 2015, a report was published asserting that the United Development Funding umbrella, which operates publicly listed and public non-traded REITs, "exhibits characteristics emblematic of a Ponzi scheme," as each successive UDF entity—e.g., UDF I, UDF II, UDF III—was used to raise funds to bail out "prior vintages" of UDF, which "continually needed a source of liquidity." The report further stated, in part, that: (i) "[v]isits to actual development sites, which serve as collateral to UDF development loans, show that, in numerous instances, there is no development and the collateral is still non-income producing, raw land 2, 3, 5 (as much as 10) years after loans were issued"; (ii) a lawsuit was filed in Texas state court in October 2015, naming UDF IV as a co-defendant in a case involving allegations of fraud, breach of contract, tortious interference and fraudulent transfer; and (iii) in November 2015, several UDF entities disclosed that their independent registered public accounting firm, Whitley Penn LLP, declined to stand for reappointment as auditor.

Shares of United Development Funding IV (NASDAQ: UDF) dropped from $17.60 per share to as low as $9.46 per share during December 10, 2015