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So the new board is appointed, "pending appeal":
United Development Funding IV and United Development Funding Income Fund V Announce Management and Board of Trustee Changes
GRAPEVINE, Texas, Jan. 24, 2022 (GLOBE NEWSWIRE) -- Pending appeal of the recent conviction of two executives associated with United Development Funding IV (“UDF IV”) and United Development Funding Income Fund V (“UDF V” and together the “Trusts”), the Trusts announced the following management and Board of Trustee changes effective immediately:
Jim Kenney was appointed acting Chief Executive Officer of UDF IV and UDF V and elected to the UDF IV Board of Trustees as a Managing Trustee
Stacey Dwyer was appointed acting Chief Financial Officer of UDF IV and UDF V
Larry Jones was elected to the UDF V Board of Trustees as an independent trustee; he will also serve as Chairman of the Board of Trustees of both Trusts
Hollis Greenlaw resigned as a trustee of both Trusts
About United Development Funding IV
United Development Funding IV is a Maryland real estate investment trust. UDF IV was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate. Additional information about UDF IV can be found on its website at www.udfiv.com. UDF IV may disseminate important information regarding its operations, including financial information, through social media platforms such as Twitter, Facebook and LinkedIn.
About United Development Funding Income Fund V
United Development Funding Income Fund V is a Maryland real estate investment trust. UDF V was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate. Additional information about UDF V can be found on its website at www.udfincomefundv.com. UDF V may disseminate important information regarding its operations, including financial information, through social media platforms such as Twitter, Facebook and LinkedIn.
Investor Contact: Media Contact:
Investor Relations 817-835-0650
1-800-859-9338 mediarelations@udfiv.com
investorrelations@udfiv.com
Disagree, two wrongs don't make a right
Read up on it:
https://en.wikipedia.org/wiki/Two_wrongs_don%27t_make_a_right
Thanks for posting all of these. I found this snippet interesting, as it shows that the auditor was basically questioning something that was settled with the SEC.
Hence the eternal delay with the accounts it seems.
If the SEC was aware of this why did they settle, begs the question.
"
During the trial, Brian Downey, a certified public accountant and auditor with Eisner Amper of New Jersey, testified that he raised questions about various transfers but couldn’t get satisfactory answers from executives of UDF.
Much of the testimony revolved around fund transfers between entities with common ownership. Downey, testifying for the prosecution, said those transfers are known as affiliate transactions or related-party transactions, and in most cases, they’re not permitted.
Downey further said he raised concerns with Greenlaw, Obert, Wissink and other UDF executives that related-party transactions were occurring. Downey never received the necessary documentation he sought to rule out that possibility, he testified.
However, when questioned by defense attorneys, Downey said many variables factor into whether something is a related-party transaction, so it’s not clear-cut.
"
To come back to your earlier post about whether one should be defending management.
The facts have emerged that Bass did something wrong independently of what management could have done wrong (and perhaps the FBI/SEC/Edelman as well)
Management is average at best and does the normal holdco hollow out. Every REIT/BDC has the same conflict issue and hence should trade at a discount.
Objectively, then there is no reason why Bass and UDF could end up in jail together. Which is, ironically, perhaps a great catalyst to unlock value from the stock, which is the only real concern here.
To be fair Phaedrus77 said:
"All the relevant exhibits are redacted, so it’s impossible to tell if Bass is spinning this."
OK so there could have been other impairments. Big deal. Does not mean it's a Ponzi scheme. Bass is trying to deflect attention from the short and distort scheme he executed. Even if impairments were required and not properly applied it does not exonerate Bass for what he did.
So this is the "spin" here from Bass lawyers... to focus on the past, the indictment and the "smoking gun email" - which I indeed would love to see.
On the indictment - I would like to note that Greenlaw and Co. did NOT take the "deal" where they would have dropped the Bivens case vs not being indicted. This how the feds normally get 99.8% conviction rate as the plea deal is always a much lower than than maximum possible sentence whilst they threaten to go for maximum sentence if you don't take the deal, especially when they know you are low on resources.
Such a crooked system that indeed convicts wrongly in a lot of instances.
Now once the accused "survive" these crooked DOJ plea deal threats (because of money, stamina and bravery) and it goes to trial, amazingly the odds change in favour of the defendant(s) ex-post.
According to my calcs the indictment has an 87% chance to be dismissed/lost at trial based on the history of cases going to trial when the plea is not taken.
Why would a guy that is well off like Greenlaw risk a prison term? Well because he believes the allegations are crap or he knows of enough wrongdoing (search warrant validity, collusion, information leakage, assisted insider trading) for this case to collapse...
Remember that the SEC settled on similar claims because arguably, UDF could have done those fund to fund ash movements at arm's length and with certainty is allowed to pay dividend from ANY source (see bylaws).
So we have some arguable impairments in the past
ONE smoking gun email found in a huge amount of discovery documents
Some re-hash of SEC allegations used by the DOJ as failed threat that they had to follow through with a high chance now to be dismissed
If this is "it" after years of investigation it seems like the SEC/FBI/DOJ/BASS complex is running out of options...
More popcorn please!
I think they pocketed fees as per their management agreements. Conflicts of interest as per usual for any BDC/REIT? The reason they should generally go for a 20-30% discount to NAV. Here the discount was arguably bigger and hence interesting as a buy. Yes tough going if no accounts are being published, but you can't blame management for that IMO.
In terms of cash being paid from the company to the SEC for settlement. It would not surprise me this was part of some insurance coverage, indemnity coverage is typically held in name of management at the company not at the individual names. I know this is the case in Europe, please shout if the US is different?
Definitely, Bass will have to "give"...
My recollection is the same. UDF can be seen as making a spread between project loans at 10-15% IRR vs. equity + wholesale bank funding at 5-7%.
So whilst I imply that in the absence of 8-Ks my (biased?) expectation is that no material haircuts were taken on loans sold (if any, as Centurion financed away from UDF mainly). I do believe it's valid to say that UDFI has suffered "opportunity losses" as they could not fund new projects given the banks were pulling away from them. Without funding the return on equity is lower.
The cross collateralisation point of Centurion is indeed significant in this context. The affidavit of Centurion says THEY in fact had to let projects go to the likes of DR Horton because UDF was pulling the plug on them (caused by the banks pulling the plug on UDF, caused by Kyle Bass).
As mentioned earlier, Bass must have understood this "plot" quite well from the 2008 crisis in which it is alleged that he started the collapse of Bear Stearns on live on television. The mechanism of a "bank run" here at UDF is no different:
https://dealbreaker.com/2016/03/wsj-kyle-bass-cnbc-bear-stearns
The kicker ploy here was obviously to kill the auditor as well. Without financials banks can't lend, everyone in finance know this. The moment you have no financials the lending stops, this is a typical termination clause in bank loans.
In the meantime Centurion is ticking nicely along:
https://www.bizjournals.com/austin/news/2021/07/09/marble-falls-thunder-rock-centurion-american.html
Did Hollis actually speak to you?
If significant losses would have been made then 8-Ks should have come out as obligatory if SEC registered.
It did twice from memory once for Buffington and one I can't remember, with only losses to UDF III and one more recently with a small loss to UDV IV.
After having settled with the SEC and being raided by the FBI I don't think they would fail to disclose a USD 10 loss from say USD 18 to USD 8?
If you are an investor that was "misled" by Kyle Bass and sold out it's market price. And no doubt the lawsuit will focus on market price.
If you are investor that bought because Kyle Bass made it cheap, it's book value.
However the former would need to constitute a class to claim damages. But then a class settled with the company already for a low ball amount I believe good for the lawyers mainly that brought the case. Can become interesting if the company wins as some of the class action lawsuits might need to be revisited.
But as a generic question I would say "both", because you look for a discount, which needs both numbers to be evaluated. Book value can be a meaningless number so whilst there lets assume its close to something called intrinsic value as well.
Cuts both ways though.. if financials show that book value is USD 15/share then it also weakens the damages claim somewhat.
I am definitely curious.
How does the Buffington sheet change the reality of the current balance sheet?
Same lawyer that tried to strike out UDF's lawyers on which the judge puked and on which they owe UDF USD 350k for waste of time.
I thought Bass was good at hyperbole but his lawyer is a cut above.
Who cares about the Buffington sheet the loan has been written down. It is the only tactic of Bass, ie referring to the SEC settlement of no wrongdoing to dig up "dirt". Which is now is irrelevant.
Buffington loan should have been marked lower, but why would you when someone like Straub was going to buy it? Where do you draw the line?
If you look at the affidavit the termsheet which would have avoided any loss on that loan would have been signed by Straub in dec'15 were it not for the Bass attack that happened concurrently. Very theoretical and useless at this point. And BTW this was UDF III. UDF IV has no losses announced via 8-Ks, but that is where Bass' the short was executed.
Of course REITs and BDCs are ran for the GP and they have conflicted interests to keep NAV high so they can charge fees. Duh. This is not unique to UDF funds. Last time I checked all private REITs trade at minimum 30% discount in the secondary.
I am in this trade because I saw value < USD 3.5, whilst assuming that it's managed by the normal, crappy, conflicted holdco sucking GP bunch.
So hey, there could be some upside...
Aiding or abetting someone doing something illegal is generally illegal. And can carry the same sentence as the criminal act itself. It's just more difficult to prove with the FBI/SEC/DOJ as they benefit from statutory protections and mechanisms.
Note for example how UDFI was de-registered in the SEC's own "kangaroo court" system ran by themselves. How do we know they were not conflicted when they deregistered UDFI.
UDFI could have appealed but I guess they had bigger fish to fry. It's better to focus on the big kill.
Let's assume a (proper) judge will sit above all of that.
It did not disappoint!
I think the Edelman discovery contains at least 2 smoking guns.
It's interesting to see the Edelman emails, because, remember, Bass urged all Hayman employees at some point to switch to Signal. However, they were having calls with Edelman who then internalised those calls via emails amongst themselves.
What is the smoking gun no.1 here IMHO is that on the 16th of February 2016 Edelman and hence Hayman/Bass knew about the FBI raid. As Bass asked Edelman to prepare a scenario if the FBI would conduct a raid.
That is arguably inside information which governments can't spill to anyone outside government. If Bass has traded on that info then that is very likely to be insider trading.
Excerpt of internal Edelman email on the 16th2016:
"Hi guys -
We've been asked to scenario plan for an FBI/SEC raid. Pls keep this to yourself for now,..."
http://www.udfonline.com/wp-content/uploads/2021/06/Edelman009274.001-Ex.-LL-Edelman-is-asked-to-scenario-plan-for-an-FBI-SEC-raid-and-prepares-media-blitz-two-days-before-it-happened-2.16.2016.pdf
My conjecture is that Bass wanted to switch to Signal once he was getting close to the FBI/SEC and got wind of a potential raid so he could plausibly deny knowing it and hence perhaps trade on the information?
The other point of note is (2) that sending the "open" letter to all auditors to deter them to work for UDF was made an open letter on the actual ADVICE of the US Attorney (!), because otherwise (if addressed directly) it would have been at danger of being "tortuous interference". The interplay here between government and a profit driven hedge fund with a short on is jaw dropping. Apart from the malicious intention on Bass'/Parker's side being completely laid bare.
http://www.udfonline.com/wp-content/uploads/2021/06/Edelman011910001-Ex.-JJJ-Edelman-discusses-Haymans-strategy-to-post-an-open-letter-geared-towards-an-auditor-audience-if-UDF-hires-auditor-6.8.2016.pdf
There are many more bits that will not go so well for Bass in front of a jury.
You can infer it from going to the county clerk websites where lots on the borrowing entities are being released.
You can see that new loans to other non Centurion entities have been extended post the 2016.
I shall stop here. If you have concerns let's be specific.
I think Bass is trying 2 things in the latest filing:
1) deflect the blame of the short to someone else so it does not look like it was him cosying up to the FBI and SEC and getting them together on his false thesis
2) re-enact the "ponzi-like" thesis.
It is obviously completely wrong to assume that because an AGGREGATE loan balance does not decrease that it then must be a fraud. Apart from the fact that loan balances have individually been re-paid. Centurion has just re-invested in other projects.
Can Centurion be too leveraged? Perhaps, but UDF has haircuts on loans and collateral values have gone up and security agreements are cross-collateralised.
Can Centurion be dodgy at instances? Perhaps, but does not implicate UDF
Suppose one ex-Centurion guy spoke to FBI in 2015. Then still the SEC settled with UDF admitting anything. This is a long time ago, if a fraud was ongoing it would have been stopped by now.
Also note that when the banks retracted from UDF, Centurion sold projects to other counterparties to raise cash to repay UDF loans. UDFI showed an 8-K to say that debt was repaid. That is NOT how a ponzi-scheme works...
It is his MO to manipulate and use the media in his favour.
https://dealbreaker.com/2016/03/wsj-kyle-bass-cnbc-bear-stearns
Google says he has USD 2.5bn. Which is a nice round number
Does anyone have access to the countersuit filled by Centurion? I would love to read it but I find it difficult understand whether it is actually available at the Tarrant County website or not.
The document folder link has not been redacted in the lawsuit.
https://macdonalddevin.sharefile.com/d-sdf20231b2b3c4c5b82cca66977c8c5f0
Probably more like generating additional discovery for their buddy Kyle Bass (via Jim Dondero). If Nexpoint were never short UDFI they could have answered that question easily and publicly? Fact is they did not. So reasonably they could have been "in" on the "destroy UDFI and buy it back cheap" play.
Or creating a "white knight" image so that people would be pursued to sell in the tender offer at a silly price.
Not saying that UDF are angels. Probably just run-off the mill holdco monks; no alpha.
However, in the latest discovery we ironically see Kyle Bass talking Jim out of the investment. Scrambling in all directions to throw mud at it. Typical sign of a guy that is being boxed in. What happened to "ponzi-like" - no good anymore?
http://www.udfonline.com/wp-content/uploads/2020/12/476_HAYMAN0053535_image.pdf
At least I can cancel my Netflix subscription if the discovery keeps on coming....
https://www.dallasnews.com/business/real-estate/2021/04/27/construction-kicks-off-on-residential-community-in-anna/
Ironically this was highlighted to Hayman by Landadvisors.com as one of the "attractive" deals outside UDF.
See Affidavit of Jonathan Sommer 5/8/2018.
Centurion going strong here, perhaps ponzi-unlike.
Hi EI how would you value the new jet fuel contract. Is that enough to be a life line?
Hi EI why is this apparent to you?
Re: hope
https://www.dallasnews.com/business/real-estate/2021/01/08/d-fw-land-rush-takes-off-as-builders-struggle-to-meet-demand/
These are collateralised loans.
If Centurion defaults, which will cross default across the full pool of UDF, UDF will sell off the collateral.
If I would go by hope, Centurion defaulting might be a good thing to get cash back, from an IRR perspective, depending obviously where you got in.
They are repaying but not on a net basis.
If its a growing market, which it is, it could be that UDF balances could be in fact increasing on new loans.
In which case UDF's book value has been growing.
Unless you think it's a Ponzi scheme.
Not complaining that the rise is not slow...
Hi I am new to this situation. Does someone have the case number for the class action lawsuit that was filed v Mudrick in 2020?
Write down to $4 should have triggered an 8-K. I did not see any.
(I did see the Buffington write down 8-K).
EOM
UDFexposed-exposed.com ?
ORDER GRANTING PLAINTIFFS' MOTION To OBTAIN DOCUMENTS IMPROPERLY DESIGNATED AS PRIVILEGED PURSUANT To THE CRIME-FRAUD EXCEPTION
"
2. For the reasons set forth in Plaintifs’ motion and supporting documents, the Court finds that the Plaintiffs have made a prima facie showing of contemplated crime or fraud by the Defendants, which Defendants knew or reasonably should have known to be crime or fraud.
"
prima facie = "based on the first impression; accepted as correct until proved otherwise"
Supreme Court said similar. I am curious to see what those 318 documents entail.
https://courtsportal.dallascounty.org/DALLASPROD/DocumentViewer/Embedded/d9cO1FRIS73mRA-uC_1M0BJ3WgmF8gLdrYGzmVSxP_8nYUo2KQGug4glKNzI9OTuVeVVa43KmHVCkbD5ngduow2?p=0
Hi EI, why do you think a steady rise is in the making, are you seeing a pattern?
If you can't trade it in RH it does not exist for WSB.
UDF would have been good material for WSB at the time.
But at least Kyle Bass knows about it, keeping up his usual narrative:
“This isn’t investing, this is insanity, ” said Kyle Bass, founder, Hayman Capital Management LP.
https://www.thestar.com.my/business/business-news/2021/02/02/insight---the-low-down-on-gamestop-wall-street-vs-reddit
Could they not grab some shares up to the 9.8% limit?
Looks these 2 settlement distributions are the initial settlement payments amounts.
Hi Runaway,
Perhaps if you could disclose any wording or paperwork that you received around the payment, or the cash amount divided by the number of shares you hold?
That should enough to figure it out.
Is it AAMC?