The foibles of Texas real-estate investment trusts no longer concern Kyle Bass. His mind is entirely focused on weightier matters, of state, and no longer has any time for the petty concerns that previously occupied his hours and portfolios.

The SEC? These days, it seems, it has nothing but time. And it’s decided to check in on a little matter it seemed to have dealt with definitely back in 2018. You see, after the loud and voluminous fulminations of a short-seller against United Development Funding, the SEC had a little look around. And then the FBI had a look around—unannounced and in person. And what the SEC found is that UDF had inflated the value of two funds, and also used money from one of the funds to pay out to investors of the other. The short-seller thought that sounded an awful lot like a Ponzi scheme, and so he called it one. Unfortunately for that short-seller, who as you have probably guessed by now is none other than Kyle Bass, the plain-language meaning of things have no place in regulatory settlements, and so the SEC was not so base as to use the term “Ponzi scheme” in its deal with UDF. And that, in the ever-amusing world of securities regulation, could make Kyle Bass a market manipulator.

U.S. securities regulators… are looking at whether Mr. Bass’s relentless criticism of UDF—including his allegations of widespread undisclosed problems in its loan portfolio—conveyed false or misleading statements that amounted to market manipulation….

In a letter on a Hayman-sponsored website, “UDFExposed,” Mr. Bass in 2016 accused executives of using newer investor money from UDF IV to pay dividends to shareholders in UDF III.

But Mr. Bass, on that website and elsewhere, also detailed what he saw as possible regulatory violations by UDF that never showed up in the SEC case. For instance, Hayman accused UDF’s managers of engaging in transactions with a large borrower that weren’t “arm’s-length” and said a separate UDF-affiliated REIT made loans to companies controlled by the UDF executives, then failed to properly value those loans when they weren’t repaid….

Ms. Velikonja, of Georgetown, said a market-manipulation case against Hayman and Mr. Bass would have to show the hedge-fund manager made intentionally false statements about UDF—even if certain aspects of the attack were accurate—to drive down the share price of the publicly traded REIT that Hayman was shorting.

Investor’s Attack on Texas Real-Estate Lender Boomerangs [WSJ]