Don’t Get Trapped in a Class Action for Pennies on the Dollar February 25, 2016

By Jay H. Salamon

UDF IV is a non-traded real estate investment trust(REIT) that issues loans to acquire and develop single-family residential lots or mixed-use master planned residential communities across Texas.UDF IV is one of a series of non-traded REITs and real estate companies, along with United Mortgage Trust (UMT), UDF I, UDF III and UDF V. United Development Funding has now admitted that it’s been under investigation by the Securities and Exchange Commission. A hedge fund founded by a Dallas investor previously claimed in a website that, “UDF exhibits characteristics consistent with a Ponzi scheme. ” On February 18, the FBI raided UDF headquarters in Dallas and removed boxes of documents, a clear indication that a criminal investigation into the company is underway.

Class Actions Against UDF

Not unexpectedly, many class-action lawsuits already have been filed.  We are not fans of class actions in securities matters, and you shouldn’t be either. In fact, except for the lawyers who handle them, no one is a fan of securities class actions.

Class actions are only a good remedy when large numbers of people have suffered minuscule individual losses for which no one would ever sue on their own. Class action suits definitely play an important role in deterring bad corporate behavior, but as a remedy, class actions make very little sense for injured investors who have meaningful losses. Settlements typically return in the range of just 2-3%. In other words, the median recovery by a class member in a securities fraud class action is two or three pennies for each dollar of loss.

Individual or Stand Alone Claims

All things being equal, an investor is likely to recover vastly more money by actively pursuing individual claims in a stand-alone or group format than by passively participating as a class member. Lawyers aren’t permitted to promise a particular result or to guarantee success. We can say, however, that in the history of our practice, investors who have opted out of class actions and had us represent them individually or as part of a small group have recovered no less than 50% of their losses. Most have recovered substantially more.

What if you had a truly significant loss – say $300,000 to $1 million, or even more? It still might make sense to be part of a group, but it also may be advantageous to bring an individual stand-alone claim. We can help you make that call. If an individual claim is best for a given investor, we handle it on a stand-alone basis.

Our investment litigation team has the extensive experience and deep knowledge needed to guide large numbers of unrelated victims who wish to opt out of class actions. If you’ve suffered investment losses in UDF IV REIT, please contact us to discuss your claim. We’ve helped hundreds of investors. Talk to us about how we can help you.

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