The SEC Filed a Lawsuit Against 2 Chicago-area Regional Centers
02/18/2013
Comment: SEC Acts On EB-5 - The Securities and Exchange Commission filed a lawsuit against 2 Chicago-area Regional Centers and their principal alleging that they defrauded EB-5 investors, defrauded USCIS, and misappropriated "administrative fees" charged to the EB5 investors; the US agency sought emergency ex parte relief. The complaint alleges numerous violations of US Securities statutes. We believe that this SEC action constitutes the most significant enforcement action within the EB-5 field since the mid-1990s. We offer some preliminary thoughts on the matter below.
While the complaint is a civil one, not a criminal one - the US District Attorney's office may yet step in and decide whether the fraud alleged merits a filing of a criminal complaint, so we cannot be certain whether this matter is yet fully framed. The SEC press release about the complaint closes with this sentence "The SEC acknowledges the substantial assistance of the USCIS" - it would be a fair bet that USCIS is energized about SEC violations within the EB-5 field, and that there are several other inquiries currently underway by USCIS w.r.t. Regional Center adherence to US Securities statutes. Furthermore, this action by SEC and USCIS has already likely helped these agencies in preparing themselves for more actions in the future. It looks like the Sheriff has come to town.
The number of investors involved - 290 - is a relatively large number, and not too many Regional Centers have collected such a quantity of investors - so it will likely not be difficult for SEC/USCIS to identify the chain which lead to the accumulation of this large quantity of defrauded investors. Regardless of the inexorable grind of law enforcement working on the miscreants in the market, it is up to each and every participant in the market to ensure that the market is kept clean. Agents in China have "no skin in the game" - and are apparently willing to dump questionable projects on unwary Chinese investors lured into the EB-5 option - solely based on the amount of fees these agents can shake from projects in desperate need of capital in the United States. We encourage Regional Centers in the US to stand up to suggestions of unusually high fees by Chinese agents, and perhaps refer these agents to USCIS for inquiry. Perhaps USCIS will consider our recent suggestions (Immigration Daily, January 24, 2013) for increased disclosures as a means of avoiding repeats of the allegations of the SEC lawsuit.
While the complaint is a civil one, not a criminal one - the US District Attorney's office may yet step in and decide whether the fraud alleged merits a filing of a criminal complaint, so we cannot be certain whether this matter is yet fully framed. The SEC press release about the complaint closes with this sentence "The SEC acknowledges the substantial assistance of the USCIS" - it would be a fair bet that USCIS is energized about SEC violations within the EB-5 field, and that there are several other inquiries currently underway by USCIS w.r.t. Regional Center adherence to US Securities statutes. Furthermore, this action by SEC and USCIS has already likely helped these agencies in preparing themselves for more actions in the future. It looks like the Sheriff has come to town.
The number of investors involved - 290 - is a relatively large number, and not too many Regional Centers have collected such a quantity of investors - so it will likely not be difficult for SEC/USCIS to identify the chain which lead to the accumulation of this large quantity of defrauded investors. Regardless of the inexorable grind of law enforcement working on the miscreants in the market, it is up to each and every participant in the market to ensure that the market is kept clean. Agents in China have "no skin in the game" - and are apparently willing to dump questionable projects on unwary Chinese investors lured into the EB-5 option - solely based on the amount of fees these agents can shake from projects in desperate need of capital in the United States. We encourage Regional Centers in the US to stand up to suggestions of unusually high fees by Chinese agents, and perhaps refer these agents to USCIS for inquiry. Perhaps USCIS will consider our recent suggestions (Immigration Daily, January 24, 2013) for increased disclosures as a means of avoiding repeats of the allegations of the SEC lawsuit.
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