A jury convicted Real Estate Investment Trust (REIT) management firm United Development Funding's CEO Hollis Greenlaw, CFO Cara Obert, partnership president Benjamin Wissink, and asset management director Jeffrey Brandon Jester on 10 criminal counts, ranging from conspiracy to commit wire fraud to conspiracy to commit securities fraud, and, of course, committing securities fraud, itself.
The convictions follow a 2018 SEC agreement with United Development Funding to pay $8.2 million in fines and disgorgement for various failures and disclosure omissions related to its real estate investment trust activities, including but not limited to misleading advertising that claimed annualized returns of up to 9.75% when, in fact, the fund was losing money and using later investors' contributions to pay off earlier investors.
According to a Department of Justice announcement, the convictions follow a lengthy investigation in which prosecutors discovered that the United Development Funding executives "shuffled money from one fund to another without disclosing the commingling to investors or regulators."
The US Attorney's Office alleged that the convicted executives perpetrated a scheme to mislead and defraud investors using a family of five funds—UDF I, UDF II, UDF III, UDF IV, and UDF V—to orchestrate the fraud through investing in residential real estate developers and then failing to inform investors about a multi-million dollar shortfall when the defendants transferred money out of one fund to pay distributions to original investors in an earlier fund.
The misleading acts of fraud at United Development Funding resulted in multi-million dollar losses, according to the FBI; the convicted UDF executives face 25 years, each, in federal prison.
If you invested in United Development Funding's UDF I-V funds, or with any firm, financial adviser, or broker who unsuitably recommended you invest in a risky REIT, such as the UDF funds, resulting in losses when the UDF funds failed, leaving later investors holding the bag when distributions to earlier investors were covered using the later funds, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.