A federal jury found four executives of Texas real-estate lender United Development Funding guilty of fraud. The verdict was a vindication for hedge-fund investor Kyle Bass, who made millions wagering against the company but faced a lawsuit and a government investigation.
Mr. Bass accused UDF in 2016 of operating a Ponzi scheme. His Dallas-based Hayman Capital Management LP made $34 million shorting the shares. But the firm came under investigation by U.S. securities regulators, who examined whether Mr. Bass’s criticism of UDF—including his allegations of widespread undisclosed problems in its loan portfolio—conveyed false or misleading statements that amounted to market manipulation. The SEC closed its investigation into Mr. Bass’s firm and took no action, he says.
