With the opportunity of the EB-5 foreign investment programs on the rise, so too seemingly are incidents of foreign investor fraud, so much so that Byrd Campbell has launched a task force to investigate and pursue claims on behalf of defrauded foreign investors.
The task force will be headed by Byrd Campbell attorney, Carlos Real (Rutgers University, Cornell Law School), a veteran securities trial lawyer, who immigrated with his family to the United States from Ecuador. [Contact: CReal@ByrdCampbell.com]. In June 2015, attorney Carlos Real successfully confirmed an arbitration award and received a civil judgment for over $663,000.00 in damages plus interest and attorneys’ fees on behalf of four British franchisees who were defrauded by a Miami-based smoothie store Franchisor under an E-2 Visa program similar to the EB-5 programs. More recently, in December 2016, that same Franchisor settled a civil charge by the Securities and Exchange Commission that he misused more than $1 million of investor funds through its EB-5 visa program.
The EB-5 program, which is sanctioned by the United States Congress, provides certain foreign investors who can demonstrate that their investments are creating jobs in this country, with a potential avenue to lawful permanent residency in the United States. Regulated by the United States Citizenship and Immigration Service (USCIS), the program allows business owners to apply to USCIS to be designated as “regional centers” for the EB-5 program. These regional centers offer investment opportunities in “new commercial enterprises” that may involve securities offerings. An investor who invests a certain amount through a sanctioned EB-5 program that creates or preserves a minimum number of jobs in the United States, is eligible to apply for conditional lawful permanent residency. The foreign investor is eligible to apply to have the conditional residency made permanent toward the end of the two-year period of conditional residency, provided the foreign investor can establish that the job creation requirements have been met. Foreign investors who invest through the EB-5 program, however, are not guaranteed a visa or to become lawful permanent residents of the United States.
Foreign investors sometimes mistakenly assume that because a business has been designated as a “regional center,” that the investment has been thoroughly investigated and approved by some regulatory body. However, the designation of a business by USCIS as a regional center does not signify that USCIS, the SEC, or any other government agency has approved the investments offered by the business. Nor does the designation express an opinion on the safety or soundness of the investment. In fact, EB-5 investment programs are often used as the capital raising vehicle of last resort by promoters who are unable to raise capital through traditional investment channels.
The SEC and USCIS have jointly published an Investor Alert warning foreign investors of the potential for fraud. [https://www.sec.gov/investor/alerts/ia_immigrant.htm]
Recent cases filed by the SEC and foreign investors show how prevalent and substantial the level of fraud may be: