Company Flagged By Kyle Bass As A Ponzi Scheme Was Just Raided By The FBI

Over the years, Hayman Capital's Kyle Bass has gotten heat for his trade recommendations, with "virtual portfolio" pundits accusing the Texan of being a "one-hit wonder" ever since his subprime trade, with little else to show for his repurtation.

That is no longer the case: after making a strong case over the past 3 months that Texas-based REIT United Development Funding IV is nothing but a Ponzi scheme - a name he has been short -  the stock tumbled, jumped, and then tumbled again.

However, after its most recent plunge moments ago which led to its being halted, we doubt it will rebound again.

 

The reason for today's most recent, and surely final crash: an FBI raid of UDF's Texas office.

As NBC DFW reports, the FBI on Thursday raided the office of a Grapevine company that has financed more than $1 billion in residential development across Texas, but some say the company operates as a Ponzi scheme.

Agents were seen carrying boxes out of United Development Funding on the 1300 block of Municipal Way and loading the boxes into large trucks.

 

UDF has acknowledged it has been under investigation by the U.S. Securities and Exchange Commission and said it was cooperating, but added no specific charges of wrongdoing have been made.

 

The FBI raid was the first indication that a criminal investigation into the company was under way.

A hedge fund founded by Dallas investor Kyle Bass, Hayman Capital Management, claims in a website that, "UDF exhibits characteristics consistent with a Ponzi scheme."

Two weeks ago, UDF’s chief executive officer, Hollis Greenlaw, tried to defend his company when he posted an online message to shareholders accusing Hayman of making “false and misleading statements about our company.” We doubt he will have any witty rejoinders this time:

FBI spokeswoman Allison Mahan confirmed that agents were at the firm's offices conducting a law enforcement operation, which she declined to characterize as a search warrant.

UDF stock is currently T1 halted, and we doubt it will reopen ever again.