U.S. Warns of EB-5 Visa Program Scams

U.S. Warns of EB-5 Visa Program Scams

Commercial News » North America Commercial News Edition | By WPJ Staff | October 22, 2013 8:37 AM ET

The Securities and Exchange Commission is warning international investors of potential scams offered through the EB-5 visa program, which presents investors in qualified projects a path to a residency visa.

The program is popular with property developers, who see EB-5 as a way to attract foreign investors. But the SEC and the U.S. Citizenship and Immigration Services are prosecuting companies that allegedly abused the system.  

The SEC is "aware of investment scams targeting foreign nationals who seek to become permanent lawful U.S. residents through the Immigrant Investor Program ("EB-5")," the agencies reported. "In close coordination with USCIS, which administers the EB-5 program, the SEC has taken emergency enforcement action to stop allegedly fraudulent securities offerings made through EB-5."

Under the EB-5 program, which was first developed in 1990, investors can earn a fast-track path to a residency visa if they invest $1 million in a job-creating commercial enterprise, or $500,000 in a "targeted employment area."

In Chicago, the SEC alleges the promoter of the "world's first zero carbon emission platinum LEED certified hotel and conference center" used false and misleading information to solicit investors. The complaint charges the developer with a "$156 million investment fraud," including allegations that the individual falsely claimed that the project had received necessary permits and had received backing from major hotel chains.

The SEC is also prosecuting a case in Texas, where they allege the creators of a regional center falsely promised returns of 5 percent on their investment and started marketing the project before the business was designated as a regional center. The defendants also misused investor funds on personal projects, including the funding for a Cajun-themed restaurant, the complaint alleges.

"The fact that a business is designated as a regional center by USCIS does not mean that USCIS, the SEC, or any other government agency has approved the investments offered by the business, or has otherwise expressed a view on the quality of the investment," the SEC warns. "The SEC and USCIS are aware of attempts to misuse the EB-5 program as a means to carry out fraudulent securities offerings."

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