Activist investor Kyle Bass said the Securities and Exchange Commission was too lenient with a fraudulent Texas real estate fund he exposed years ago and is now botching his attempts to be paid as a whistleblower.
“I turned a fraud in where one of my analysts found a Ponzi scheme and the SEC actually just completely dropped the ball,” Bass, the founder of Hayman Capital Management, said in a Bloomberg Television interview Thursday, referring to United Development Funding. Bass brought his concerns about the company to the SEC and mounted an anonymous online attack against the company, earning an estimated $30 million by selling UDF stock short.
Bass noted that while the SEC investigated and sanctioned the company in 2018, it left management in place. The Department of Justice later brought securities fraud and other charges against four company executives, who last year were convicted and sentenced to years in federal prison.
While Bass’ feud with UDF is over, it sparked a new and continuing one with the SEC, which collected more than $8 million from UDF. In December the agency rejected Bass’ whistleblower claim while awarding $2.5 million to another, anonymous tipster. By law SEC whistleblowers are entitled to between 10% and 30% of any money recovered.
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