Bloomberg Law
May 25, 2023, 5:19 PM

Kyle Bass Says SEC ‘Blew It’ Twice in Handling of UDF Scandal

John Holland
John Holland
Senior Investigative Reporter

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.

Bass filed a lawsuit in the Fifth Circuit Court of Appeals claiming, among other things, that the agency wrongly denied him by invoking a rule that didn’t exist at the time and ignoring its own precedents. In April, the SEC took the rare step of acknowledging it incorrectly ruled that Bass didn’t personally file the tip, and sent his case back to the commission for a new vote.

The agency reserved the right to again reject his application for other reasons. The agency said this week it wouldn’t comment on the Bass case beyond what is in its legal filings.

According to the lawsuit and Bass’ television interview, he gave the SEC everything it needed to take on UDF, then ignored him when he asked to be paid for his efforts.

“They denied our award when we gave them an 80-page PowerPoint that was connecting all the dots for them,” Bass said in the interview. “The SEC has to do a better job with whistleblowers. It’s that simple.”

-Alix Steel and Guy Johnson of Bloomberg Television contributed to this report.

To contact the reporter on this story: John Holland at

To contact the editor responsible for this story: Gary Harki at

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