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Allegations of Fraud in EB5 Program

Written By The Shapiro Law Group on May 20, 2016

Immigrants seeking an EB5 green card to enter the United States are often at risk of being taken advantage of by unscrupulous individuals. Eager to gain legal entrance to the United States, many overlook questionable investments and may be lax in fully vetting projects before investing in them. Because the investor is more concerned about getting their green card, they may not be as concerned as a local investor is about the return on their investment.

Fraud Hits Rural Vermont

Recently a Ponzi-like scam carried out by Northeast Kingdom developers has been uncovered in Vermont. In a recent lawsuit filed by the U.S. Securities and Exchange Commission (SEC), several real-estate developments made by Jay Peak ski resorts and foreign investors through the EB5 system have fallen under fraud allegations. It is alleged that the real estate developers targeted EB5 investors who provided more than $350 million in investments over the course of eight years. More than $50 million of this money was diverted to cover budget shortfalls in previous projects and for the personal gain of the developers.

To date, the Jay Peak resort real estate development is the highest-profile project to be investigated by regulators. Considering the minimum investment of $500,000 to be eligible for the EB5 program, there are many foreign investors involved in this case. With their immigration status on the line, this has left many investors anxious over what will become of their EB5 green card, with most still without their permanent card.

Not the First Time a Major EB5 Fraud Has Been Uncovered

Illinois residents may be familiar with the 2014 scam where businessman Anshoo R. Sethi misled foreign investors. He was required along with A Chicago Convention Center (ACCC) and Intercontinental Regional Trust of Chicago (IRCTC) to pay over $15 million in damages and penalties under a settlement reached with the SEC.

Fighting EB5 Fraud with Increased Oversight

As more fraud allegations surrounding the EB5 program are being uncovered, the SEC has chosen to increase their EB5 investigations this year. Currently, proposed reform measures to the program have stalled in Congress as lawmakers and urban real estate developers argue over what are seen as inequities to how EB5 is administered throughout the country.

It is important for potential EB5 green card seekers to carefully scrutinize the projects they plan to invest in to protect themselves. When abuses are found, investors should report the alleged illegal activities to the SEC.