UDF management claims that its business model is sound.
Using cash from new investors to repay existing investors is not sound.
According 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.”
UDF has been the subject of a
“non-public fact-finding investigation”
being conducted by the SEC,
according to UDF disclosures.
“Shifting money from one investment fund to another within the same family of funds in order to pay distributions to investors isn’t proper, a former director of embattled United Development Funding testified Friday in the trial of four top company executives charged with securities fraud and conspiracy.”
"Government prosecutors attempting to send four executives of a North Texas-based real estate investment trust to prison called witnesses Thursday to build their case that transfers between the REIT’s funds are illegal."