United Development Funding III and IV Executives Ordered to Pay $8.2 Million

The Securities and Exchange Commission (SEC) recently filed a civil complaint against United Development Funding III, United Development Funding IV, and executives of the companies, including Hollis Greenlaw, Benjamin Wissink, Theodore Etter, Cara Obert, and David A. Hanson.  The SEC alleged that UDF III and IV were two real estate funds, and that these funds misled investors by failing to disclose that it could not pay distributions and was using money from a newer fund (UDF IV) to pay distributions to investors of the older fund (UDF III).

The SEC alleged that UDF III lacked cash flow to satisfy investor distributions, so UDF III borrowed funds from UDF IV.  The SEC also alleged that UDF III failed to appropriately impair the loans from UDF IV according to Generally Accepted Accounting Principles (or GAAP).  Without admitting or denying the allegations, Greenlaw, Wissink, Etter, and Obert agreed to pay $8.2 million, consisting of disgorgement, prejudgment interest, and civil penalties.  David Hanson also agreed to pay a $75,000 civil penalty.

United Development Funding IV was previously publicly traded on the NASDAQ, but it has since been delisted.  UDF IV currently trades for about $3.25 per share on the OTC markets, but these are thinly-traded.  Moreover, this is a substantial drop from 2015, when the shares were trading for about $17 to $20 per share.  The FBI previously raided UDF’s offices in February 2016, but no criminal action was taken against UDF.

Brokers and investment advisors who recommend investments like UDF III and IV have a duty to adequately research a product before selling such to an investor.  If the broker failed to adequately research and disclose risks to an investor, the broker, advisor, and/or their brokerage firm may be liable for investment losses.  Our firm has represented several investors who have lost money investing in United Development Funding III and IV.

Click to view:  United Development Funding SEC Complaint

          If you lost money investing in United Development Funding III, or IV, please CONTACT US at 720-599-3505 for a free consultation.

Israels & Neuman, PLC is a private law firm and is not affiliated with any government or law enforcement agency.  Any investigation referenced in this blog is independent in nature and is being conducted by our law firm privately, not in conjunction with any government or law enforcement agency.  All information contained in this blog should be deemed statements of opinion derived from the author’s review of public records, not statements of fact.  This blog is advertising material and does not create an attorney client relationship, nor does it constitute legal advice.  Everyone’s situation is different and the question of whether or not you have a claim will vary on a case-by-case basis.  In contingent representation, clients may still be liable for costs.