EB-5 Investors: Beware of Fraud

(By Rahul Reddy & Rebecca Chen, Attorneys at Law)

 EB-5 fraud has cost investors millions of dollars in 2015 alone. In July of 2015, the Securities and Exchange Commission (SEC) filed charges against a California oil and gas company for intentionally defrauding EB-5 investors in a $68 million Ponzi scheme. The SEC’s complaint alleges that Bingqing Yang, owner of Luca International Group, LLC and its affiliated companies, represented to investors that their money would be invested in oil and gas drilling operations,  but actually used the investors’ money for sham profit payments to earlier investors, along with his own personal use. Even though Luca International’s drilling operations were losing millions of dollars, Yang and her co-conspirators spent massive amounts of investor money on vacations, golf outings, a $2.5 million home in a gated community, and even $200,000 in speaking fees to have Former President George W. Bush speak at golf outing for new potential investors hosted in Pebble Beach, California.

In addition to losing investors millions of dollars, fraud can jeopardize EB-5 investors’ legal status in the United States. This is because the EB-5 program initially awards the investor a conditional green card good for two years before providing him with a permanent green card. If the investor does not provide the investment required for EB-5 status, he could ultimately lose his permanent residence status. (Please refer to our article titled EB-5 Investors: Explained for more details on the EB-5 visa) 

How to become an EB-5 Immigrant Investor, the Right Way

If you are looking to become an EB-5 immigrant investor, you should ensure your investment is fully compliant with USCIS regulations to avoid falling prey to EB-5 investment fraud. Be sure that any EB-5 investment you make with another party is done through a properly registered broker-dealer to minimize the chance you will be a victim of fraud. Additionally, be wary of any signals that fraud may be present, such as promises that the investment will lead to the receipt of a green card, guaranteed investment returns, or extremely consistent investment returns regardless of market conditions. 

However, the safest possible option for becoming an EB-5 investor is to not trust another individual or group with your investment, and instead invest your capital into your own business enterprise. By doing so, you will retain financial and managerial control over your investment, ensure that you will not be victimized by an EB-5 investment scam, and have the best likelihood of retaining your green card after the initial 2-year provisionary period.

Regardless, it is important to keep in mind that an EB-5 petition will not automatically result in a permanent green card. In 2012, approximately 80% of investors who applied for conditional two-year green cards received approvals. While this statistic is promising, the real struggle occurs after this initial step. Less than 50% of EB-5 investors with temporary green card approvals ultimately apply for permanent green cards, and of those about 80% obtain permanent green cards. This surprising figure is essentially due to one underlying issue: the failure of the applicants’ investments.  In order to gain permanent residence status, an investor must sustain an investment in a business for the full two years and provide full time jobs for 10 qualifying or existing employees, which many investors are unable to accomplish.

  

Reddy & Neumann, P.C. is an immigration law firm in Houston, Texas. For over 15 years, our firm has successfully represented corporate clients across the United States in their efforts to bring foreign workers and business professionals to the United States. Reddy & Neumann, P.C. is highly experienced in working with employment-based visas, adjustment of status, green cards, and PERM labor certification. From filing, through approval, and on to appeal, we do everything possible to ensure that your company can bring the best and brightest in the world to the United States.