Fraudsters Use EB-5 Immigrant Investor Program To Scam Investors
Recently, there has been rise in investment fraud through the EB-5 Immigrant Investor Program. The EB-5 program, administered by the U.S. Citizenship and Immigration Services (USCIS), provides a path to legal residency for foreigners who invest directly in a U.S. business or private regional centers that promote economic development in specific areas and industries. The purpose of the EB-5 program is to stimulate the U.S. economy through job creation and capital investment by foreign investors. Lately, however, marketers have used this investment-for-visa program to defraud investors.
In a typical scheme, a company and its fundraisers will solicit EB-5 investors with the promise of high rates of return and/or U.S. residency. In some instances, the companies will even guarantee that the investments are risk-free. In reality, many of these companies act as Ponzi schemes or other illegal operations. The common SEC violations arising out of EB-5 schemes include:
- Making any untrue statement of a material fact, omitting material facts, or engaging in any act, practice, or course of business which operates as a fraud, violating Section 10(b)-5 of the Securities Exchange Act of 1934;
- Fraud and misrepresentation, violating Section 17(a) of the Securities Act of 1933; and
- Unregistered broker-dealers engaging in the sale of securities, violating Section 15(a) of the Securities Exchange Act of 1934.
SEC Enforcement Actions
In a recent enforcement action, on July 26, 2016, the SEC obtained a $63.8 million judgment against an oil company for a scheme that targeted EB-5 investors. The SEC alleged in their complaint that Luca International Group, LLC and its entities (collectively, the “Luca Entities”), targeting investors in Asia to invest in unregistered offerings of securities. Luca Entities represented to investors that their money would be invested in oil and gas drilling operations, and that they could expect risk-free annual rates of return of 20-30 percent. Luca Entities deceived investors by misrepresenting that their operations as successful, all while knowing that the company was losing millions of dollars. Luca Entities maintained this deception by using money from new investors to make sham profit payments to earlier investors until its bankruptcy in August 2015.
In another enforcement action, on June 23, 2015, the SEC charged two firms (Ireeco LLC and Ireeco Limited) that illegally brokered more than $79 million of investments by EB-5 investors seeking U.S. residency. Ireeco LCC used its website to solicit EB-5 investors and provide them with the “information and education” they would need in choosing the right regional center to invest with. After securing foreign investors from the website, Ireeco LCC would then direct them to the same handful of regional centers that paid the company a commission averaging around $35,000 per investor. While raising money for EB-5 projects in the U.S., these two firms were not registered to legally operate as securities brokers. The SEC sought to disgorge all of the ill-gotten gains and subject the companies to civil penalties pursuant to Sections 21B and 21C of the Exchange Act.
For more information on payments to unregistered persons, see Senator Grassley’s testimony on the EB-5 program.
SEC Whistleblower Rewards and Bounties
Under the SEC Whistleblower Program, whistleblowers may be eligible for monetary awards when they voluntarily provide the SEC with original information about violations that leads the SEC to bring a successful enforcement action resulting in monetary sanctions exceeding $1,000,000. Whistleblowers are eligible to receive between 10 percent and 30 percent of the monetary sanctions collected.
SEC Whistleblower Protection
The SEC Whistleblower Program also protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Furthermore, the Dodd-Frank Act protects whistleblowers from retaliation by their employers for reporting violations of securities laws.
Experienced SEC Whistleblower Attorneys
The experienced whistleblower lawyers at Zuckerman Law represent whistleblowers worldwide before the SEC under the Dodd-Frank SEC Whistleblower Program. The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex financial fraud to the SEC, and two of the firm’s attorneys served on the Department of Labor’s Whistleblower Protection Advisory Committee and in senior leadership positions at a government agency that protects whistleblowers.
Firm Principal Jason Zuckerman has been named by Washingtonian Magazine as a “Top Whistleblower Lawyer” and the firm has been ranked by U.S. News as a Tier 1 Firm in Labor & Employment Litigation.
Leading whistleblower law firm Zuckerman Law has substantial experience investigating securities fraud schemes and preparing effective submissions to the SEC concerning a wide range of federal securities violations, including:
- Accounting fraud;
- Investment and securities fraud;
- EB-5 investment fraud;
- Manipulation of a security’s price or volume;
- Fraudulent securities offerings and Ponzi schemes;
- Unregistered securities offerings;
- Investment adviser fraud;
- False or misleading statements about a company or investment;
- Inadequate internal controls; and
- Violations of auditor independence rules.
For more information about the SEC Whistleblower Program, download our free ebook SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award and see the following resources:
- Tips for SEC Whistleblowers
- Leading SEC Whistleblower Law Firm Featured in Article About Growing Wave of Whistleblower Lawsuits
- SEC Whistleblower Reward Program FAQ
- Auditors’ and accountants’ guide to SEC whistleblower awards
- Whistleblower Protections and Incentives for Auditors and Accountants
- How to Report EB-5 Fraud and Earn an SEC Whistleblower Award
- CFTC Strengthens Anti-Retaliation Protections for Whistleblowers and Improves CFTC Whistleblower Award Program
- SEC Cracking Down on Ponzi Schemes
- SEC Scrutinizes “Fake News” Stock Promotion Schemes
- SEC Whistleblower Program: Exposing Insider Trading
- SEC Awards for Disclosures of Foreign Bribery or FCPA Violations
- Whistleblower Rewards and Bounties for Disclosures of Market Manipulation Schemes
- SEC Targeting Investment Adviser Fraud
- Compliance Personnel, Auditors, Officers and Directors Can Obtain SEC Whistleblower Awards
- Money Laundering and the SEC Whistleblower Program
- International Whistleblower Representation – SEC Whistleblower Attorney
- Anonymous Whistleblowing: Does the SEC Whistleblower Program Protect a Whistleblower’s Identity?
- SEC Awards for Disclosures of Foreign Bribery or FCPA Violations
- Securities Fraud Enforcement Action Prompts the Question: What Was the Company Smoking?
- Compliance Officer Whistleblower Representation
- SEC Whistleblower Program: What is the SEC Form TCR?
- Tale of Two Whistleblowers: Lessons Learned from Today’s SEC Whistleblower Award
- Whistleblowers Help CFTC Obtain Record Penalties for Commodities Fraud
- Report Underscores Importance of Whistleblower Rewards and Protections for Internal Auditors
- SEC Sanctions: Whistleblower Reference Guide
- Protections and Rewards for Cybersecurity Whistleblowers
- CFTC Announces Second Whistleblower Award in 2016 as the Agency’s Whistleblower Reward Program Picks Up Steam
- EB-5 Visa Scandal Underscores the Critical Role Whistleblowers Play in Exposing EB-5 Fraud
- SEC Enforcement Director Touts Success of SEC Whistleblower Program
- SEC Whistleblower Program Not Limited to Corporate Insiders
- SEC Pays $3M Award to Whistleblower
- SEC Draft Strategic Plan Affirms the Importance of the SEC’s Whistleblower Reward Program
- Whistleblower Lawyer Interviewed About SEC Whistleblower Award
- Wall Street Journal Quotes Jason Zuckerman on Dodd-Frank SEC Regulations
- SEC Whistleblower Lawyer Quoted in National Law Journal About SEC Whistleblower Program
- SEC Whistleblower Lawyer Zuckerman Quoted About SEC Whistleblower Award for Independent Analysis
- SEC Whistleblower Lawyer Jason Zuckerman Quoted About Tips for SEC Whistleblowers
- Whistleblower Lawyer Jason Zuckerman Quoted About SEC Whistleblower Award
- Whistleblower Lawyer Interviewed About the Rise of Cybersecurity Whistleblowing
- Whistleblower Attorney Zuckerman Quoted in Washington Post About SEC Order
- Whistleblower Attorney Dallas Hammer Interviewed by Bloomberg About Dodd-Frank Protected Whistleblowing
- SEC Whistleblower Lawyer Zuckerman Quoted About SEC Whistleblower Award for Independent Analysis
- Audit committees need to dig into personal relationships
- Whistleblower Bounties Pose Challenges
- CFO Magazine Quotes Whistleblower Attorney Jason Zuckerman About Dodd-Frank Whistleblower Rules
- Fiscal Times Quotes Jason Zuckerman About Dodd-Frank Act Whistleblower Reward Provisions
- Whistleblower Attorney Jason Zuckerman Quoted About Battle Over Corporate Whistleblower Rules
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