Four UDF Executives Charged With Ten Felony Counts Of Fraud

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Four UDF Executives Charged With Ten Felony Counts Of Fraud
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Indicted! Four UDF executives charged with 10 felony counts of fraud: Greenlaw, Wissink, Obert and Jester. Excerpt from the October 15, 2021 Grand Jury and US Attorney Indictment is below:

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"The purpose of the conspiracy was to: (a) conceal from UDF Fund III, Fund IV, and Fund V's shareholders, the investing public, due diligence entities, external auditors, and the SEC the true performance of Fund Ill's business; (b) conceal from Fund III, Fund IV, and Fund V's shareholders, the investing public, due diligence entities, external auditors, and the SEC Fund Ill's financial condition, in order to encourage investment in later funds, e.g., Fund IV and Fund V; and (c) enrich defendants Hollis Morrison Greenlaw, Benjamin Lee Wissink, Cara Delio Obert, Jeffrey Brandon Jester, and others through the continued receipt of compensation."

General Allegations Against UDF

Summary of the Scheme

  1. From on or about January 1, 2011, through on or about December 29, 2015, the defendants Hollis Morrison Greenlaw, Benjamin Lee Wissink, Cara Delio Obert, and Jeffrey Brandon Jester, and others, led by Greenlaw, engaged in a scheme to defraud using investment fund entities ("Fund entities"), that is, Fund III, Fund IV, and Fund V. As part of the scheme, the defendants offered and caused others to offer various Fund entities to the public for investment. The Fund entities were presented as companies that would provide loans to residential housing developers who needed funds to build residential developments. Utilizing money obtained from investors and financial institutions, Greenlaw, Wissink, and others caused loans to be issued to developers for residential developments. As part of the Fund entities' investment opportunity, investors were led to believe that the residential housing developers, who obtained loans from the Fund entities, would be required to pay back the loans with interest, which money would then serve as the source of distributions paid to the investors.
  2. Almost from inception, Fund III paid monthly distributions to its investors using money purportedly from revenues derived from Fund Ill's loan portfolio. However, developers were not repaying loans obtained from Fund III quickly enough, thereby leaving Fund III without sufficient cash to pay distributions to investors from its own revenues. At the direction of the defendants, a subsequent entity, Fund IV, began raising money from investors using representations that the funds would be used to provide loans to developers. However, cash raised from the Fund IV investors was used to repay loans previously issued to developers by Fund I and Fund III. Further, money raised from Fund IV's investors was used to pay distributions to Fund Ill's investors and to pay other Fund III financial obligations.
  3. In or around 2014, defendants Hollis Morrison Greenlaw and Benjamin Lee Wissink began the process of forming a subsequent Fund entity, Fund V. Third party firms and investors were led to believe that Fund V would not engage in affiliate transactions with the other Fund entities. However, beginning in or around December 2014, because developers were not repaying Fund III and Fund IV loans quickly enough to meet the obligations of Fund III and Fund IV, Fund V began issuing loans to developers for developments that previously had loans with Fund III and Fund IV. The Fund V loans were then used to repay the loans previously issued to developers by Fund III and Fund IV. Further, beginning in or around December 2014, Fund V's investors' money was used to pay distributions to Fund III and Fund IV's investors and to pay other Fund III financial obligations, contrary to representations made to Fund V's investors.
  4. Between on or about January 24, 2011, and on or about November 24, 2015, approximately $65 million in Fund IV investors' money was used to pay Fund III investors a purported return on their investment and pay other Fund III financial obligations. Likewise, in or about December 2014, approximately $2.7 million in Fund V investors' money and money obtained by Fund V from a financial institution was used to pay Fund IV investors a purported return on their investment, contrary to representations made to Fund V investors. Further, between on or about July 23, 2015 and December 29, 2015, approximately $4.7 million in Fund V investors' money was used to pay Fund III investors a purported return on their investment and to pay other Fund III financial obligations, contrary to representations made to Fund V investors.

Read the full indictment here.

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