SEC Continues Pursuit of EB-5 Fraud as Congress Considers Program Renewal

As the House and Senate consider extending the EB-5 program into 2019, the SEC has filed a civil enforcement action against a California developer for investor fraud in the visa program. An article in the Los Angeles Times about the filing notes the increase in these types of cases, as the securities regulator has filed five this year versus a total of three in the previous two years.

The EB-5 program allows foreign investors to make an investment in a commercial enterprise here in the United States that plans to create or preserve full-time jobs for American workers. The investment allows the entrepreneurs, their spouses and unmarried children to apply for a green card. The program was developed to encourage job creation and capital investment by foreign investors. Although there can be many forms, one of the businesses where it is most frequently used is in real estate development.

The EB-5 investment program has grown rapidly since the recession, and with it cases of securities fraud. And the program has already been the subject of at least one SEC whistleblower reward, as the agency seized funds from a developer after they misrepresented aspects of the project to investors. In the latest case detailed by the Los Angeles Times, the developers misappropriated more than $10 million of the $20 million they raised from Chinese investors. Individuals from China have been a frequent target of this type of securities fraud.

The program is 25 years old but requires reauthorization by Congress this year. It has been criticized for the disproportionate number of projects in wealthy areas and reform is expected if the House and Senate are to extend it. I believe the deadline for authorization or renewal is currently December 11th.

Regardless of whether it is renewed or not, we think that news about fraud in the current investment projects solicited through EB5 will continue to draw the attention of the SEC and are ripe for potential rewards from the SEC whistleblower office.  If you are an investor in one of these projects with evidence of misappropriation or misrepresentations by the developer, please call 1-800-590-4116 or contact us to speak to one of our SEC whistleblower attorneys.

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