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According to the Justice Department—and now, a federal jury—the people running a Texas lender, United Development Funding, went to great pains to mislead investors and the Securities and Exchange Commission about the success of tis funds. And it worked, because when UDF started complaining that hedge fund manager Kyle Bass was spreading false and misleading information about it, the SEC rushed in to take a look.

Of course, the SEC didn’t find anything, which is probably because the things that Bass said—notably, that UDF was a Ponzi schemerang true, at least to the aforementioned jury.

The federal jury convicted UDF Chief Executive Hollis Morrison Greenlaw and three other executives of 10 counts, including conspiracy to commit wire fraud affecting a financial institution, conspiracy to commit securities fraud, and securities fraud…. The U.S. Department of Justice alleged that when developers failed to repay money they borrowed from one UDF fund, the executives transferred money out of another fund to pay distributions to the original fund’s investors without disclosing the transfers to the SEC and investors. The defendants face up to 25 years each in federal prison.

Convictions at Real-Estate Firm Are Win for Investor Kyle Bass [WSJ]

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