UDF Down Much More As Forbes Story Circulates
In an article out Friday, Forbes author Brad Thomas uncovered new information regarding United Development Funding IV (NASDAQ: UDF), the alleged "Ponzi-scheme" and the anonymous poster who circulated the allegation.
The piece outlined how hedge fund investor Kyle Bass recently launched a website, on which Bass exposed his firm's opinions toward UDF— subject of much controversy thanks in large part to the previously anonymous bear thesis on the website Harvest Exchange.
Thomas, who covered the potential "Ponzi-scheme" late in 2015, laid out the evidence found on Bass' site, commenting that Bass seems to have "been the face behind the anonymously written content on the Harvest website."
Furthermore, Thomas quoted Bass as writing, "[A]ccording to the SEC a Ponzi-scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors," and that the "SEC has been the subject of a non-public fact-finding investigation being conducted by the SEC (according to disclosures."
Bass' firm, Hayman Capital Management, L.P., has a short position in UDF's common stock and therefore, "will profit if the market price for the common shares decline, and conversely, Hayman will lose money of [sic] the market price increases," Thomas said.
Early Friday Insights
Earlier on Friday, Benzinga's news desk published an article regarding the situation.
Benzinga previously explained that according to Bass, "[T]he hedge fund is short UDF because it has ‘exhibited characteristics consistent with a Ponzi scheme' larger than $1 billion. Bass cited UDF's use of new investor money to pay existing investors, a distorted track record and its use of complex real-estate backed loans to confuse ‘Mom and Pop' investors."
Following the Harvest article's publication, UDF tumbled $8.45, from $17.00 to $8.55. Throughout the day, UDF remained fairly flat at the $9.00 level until it once more plummeted shortly after 2 p.m. EST.
At the time of this publication, the stock is down 46.07 percent on the day and trading at $5.50.
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