EB-5 Fraud: Practical Advice for Investors

EB-5 Fraud is on the rise.  From immigration attorneys acting as unregistered broker-dealers to scammers preying on unsuspecting investors the field is a potential trap for the unwary.

In 1990 the US Congress devised the Immigration Investment Program in the hopes of attracting capital to the US from foreign investors.  The program came to be known as the EB-5 program.  As a means to attract investments Congress offered the potential for Visas, “Green Cards” and residency status to foreigners who agreed to invest at least a million dollars into a business that agreed to employ or continued to employ at least ten full time US workers.  The EB-5 program also provided that a $500,000 investment in a “rural area” or an area of “high unemployment” would qualify.

As a result, investments grew around so called “Regional Center Investments” such as hotels, business parks, warehouses or other “economic units” that offered the prospects for job growth.

Investments into Regional Centers typically take the form of an investment into an LLC or a limited partnership, which the Securities and Exchange Commission and most states regulators consider to be securities.  The sale of securities requires registration or an exemption from registration, as well as disclosures to investors.  In addition, if the securities are sold via an outside promoter or attorney, that person must be registered as a broker dealer.  The SEC has brought several actions recently targeting attorneys and others who assisted in the raising of capital under the EB-5 program.

In the Matter of Edwin Shaw LLC

Securities and Exchange Commission v. Steve Qi

Unfortunately for investors in the EB-5 program, the access to easy money from foreign investors has attracted scammers to this field.  The value of a potential US Visa combined with the opportunity to invest in a growth oriented enterprise has caused many EB-5 investors to overlook with whom they are trusting their money.

In addition to the potential loss of funds from trusting a scammer, the receipt of the potential Visa or green card is dependent on the success of the venture, which may be based on faulty assumptions, permitting problems or an economic downturn. That is why it is so important to review the information supporting the investment carefully before committing to invest.

Aware of the potential for foreign nationals to be misled the SEC issued an investor alert to provide some guidance and warnings for investors to consider prior to making their sizeable investment.

In addition to the SEC, the US Govt. also publishes a list of approved regional centers. www.uscis.gov.  Investors should be mindful that just because a name appears on that list does not mean it is endorsed by the govt.

The investment should also come with disclosures, such as financials, information about the sponsor and developer, and copies of approval letters and permits received on the project.  These should be reviewed carefully to make sure the investment has the necessary permission to proceed in the EB-5 program.  While not realistic for all potential investors, a site visit should be conducted to see firsthand what is being proposed, the surrounding area, and if possible, a meet and greet with the developer and investment sponsor.

As with all investments, if the deal sounds too good to be true, don’t invest.  A project that guarantees a visa or green card is a red flag as all the EB-5 program does is provide “eligibility” for a Visa, not a guarantee of a visa, a green card or residency.  Ultimately, the project must meet the requirements of the EB-5 program and actually provide the jobs and economic growth contemplated by Congress for an immigrant to “cash in” on his or her investment, and obtain access to US residency.

If you are the victim of EB-5 investment fraud please call The Law Office of David Liebrader at (702) 380-3131 for a free, confidential consultation to discuss your legal rights and options.

There is no charge for the initial consultation, so call (702) 380-3131 today to speak with an experienced securities attorney who will fight to recover your losses.

The Law Office of David Liebrader practices exclusively in the field of investment loss recovery.  For the past 23 years, we have dedicated our law practice to assisting investors who have been victims of investment fraud via fraudulent and unsuitable investment transactions.  During that time we have recovered money for over one thousand individuals, pension plans, trusts and companies.  The recoveries we have obtained via judgments, awards and settlements on behalf of our clients exceed $40,000,000.


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