EB-5 Investment Fraud

Business owners apply to have their businesses designated as “regional centers” for the EB-5 program. These regional centers sponsor capital investment projects for EB-5 investors. Foreign investors look to regional centers to supply legitimate, EB-5 qualifying investment opportunities.

These businesses, however, are not necessarily vetted by U.S. government agencies to ensure they are legitimate. Other businesses market themselves as EB-5 qualifying investments without being designated a regional center at all. These fraudulent businesses collect foreign investors’ money and misuse it for their own purposes. The money does not go towards creating jobs for United States workers or towards stimulating the United States economy, and thus does not qualify for the EB-5 immigration program. Foreign investors are left without their money and without the means of qualifying for United States residency.

The United States Securities and Exchange Commission (SEC) has issued an alert concerning EB-5 investment scams and has urged foreign investors to be cautious of fraudulent investment opportunities. The SEC alert outlines the warning signs of EB-5 Investment Fraud:

• Promises of a guaranteed Visa or permanent residency
• Guaranteed investment returns/Promises of no Investment Risk
• Overly consistent high investment returns
• Investments that are not registered as regional centers
• Unlicensed sellers (Designation as a regional center does not make a seller licensed)
• Layers of companies run by the same individuals

If you are an EB-5 investor, and have been subjected to any of these warning signs, you may by the victim of EB-5 investment fraud. Speak with an experienced securities fraud lawyer to learn how you may recover your losses.

Over the past couple of years, some EB-5 Fraud cases have received public attention. Two major cases include:

Jay Peak, Inc. Investigation

The Jay Peak, Inc. lawsuit was filed by the SEC on April 12, 2016. Jay Peak, a Vermont ski resort controlled by Ariel Quiros and William Stenger, raised $350 million in investor funds since 2006. Jay Peak raised the money from over 700 investors around the world through the EB-5 Immigrant Investor Program. The investments were supposed to fund the construction of certain projects related to Jay Peak Ski Resort or a Vermont biomedical facility.

However, most of the money was distributed among Jay Peak’s affiliates. Over $50 million of the money raised by EB-5 investors was misused by Jay Peak’s owners to purchase luxury condos, pay the owner’s income taxes, and pay off loans.

Cancer Treatment Center Investigation

On June 2, 2016, another EB-5 Investor Fraud case was announced by the SEC. The SEC filed a complaint against Xin “Lisa” Wang and Charles C. Liu for misusing investors’ money that was raised for the purpose of building a cancer treatment center. Wang and Woo raised over $27 million from Chinese EB-5 investors to build a center that would treat cancer through proton beam radiation.

However, after 18 months there has been no construction at the proposed site, and Liu has transferred $11 million of investor funds to firms in China and diverted another $7 million of investor funds to his wife’s personal account.

Since its inception, Gibbs Law Group has been on the forefront of investment fraud prosecution. We have recovered damages in cases alleging a variety of frauds and scams, including:

Medical Capital Litigation

This class action was brought on behalf of investors who suffered from an investment scam by four different financial entities. These entities disguised Medical Capital notes as reliable investments for their clients, which later turned out to be investments in a Ponzi Scheme. Gibbs Law Group served as Co-lead Council on this case and secured a settlement of $80 million on behalf of investors.

Towers Financial Corporation Noteholders Litigation

Gibbs Law Group served as liaison counsel in this class action brought against promoters and professionals who falsely marketed Towers Financial Corporation’s promissory notes. The Securities and Exchange Commission described this failed investment scam as the “largest Ponzi scheme in U.S. history.”

American Express Class Action Lawsuit

This class action as brought against American Express Financial Advisors who claimed to offer financial planning and advice tailored to client’s specific circumstances. In reality, these advisors provided “canned” financial planning, and gave clients general advice meant to direct them to specific mutual funds. Gibbs Law Group helped secure a $100 million settlement on behalf of American Express clients in this case.

Auction-Rate Securities Class Action Lawsuits

Gibbs Law Group served as co-lead counsel on a number of lawsuits against banks and broker-dealers who misrepresented the liquidity and risks of auction-rate securities. This misrepresentation resulted in the collapse of the auction rate securities market. The lawsuits helped spark the interest of state regulators, and many Wall Street firms eventually agreed to re-purchase auction rate securities from investors who bought directly from the banks.

H&R Block IRA Class Action Lawsuit

Gibbs Law Group served as co-lead counsel in a class action lawsuit against H&R Block. The case alleged that the company mislead customers in the sale of “Express IRAs.” Our law firm helped acquire a $19.4 million settlement to repay the fees charged under the Express IRA program.