Fraudsters Use EB-5 Immigrant Investor Program To Scam Investors
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.
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.
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:
Matt Stock is a Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor. As an auditor, Stock developed an expertise in financial statement analysis and internal controls testing and fraud recognition. He uses his auditing experience to help SEC whistleblowers investigate and disclose complex financial frauds to the government and develop a roadmap for the SEC to take an enforcement action. Matt has been interviewed on CNBC, quoted extensively about whistleblower rewards in the media, and is the lead author of SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.
Dallas Hammer has extensive experience representing whistleblowers in retaliation and rewards claims and has written extensively about cybersecurity whistleblowing. He was selected by his peers to be included in The Best Lawyers in America® in the category of employment law in 2021 and 2022.
Described by the National Law Journal as a “leading whistleblower attorney,” founding Principal Jason Zuckerman has established precedent under a wide range of whistleblower protection laws and obtained substantial compensation for his clients and recoveries for the government in whistleblower rewards and whistleblower retaliation cases. He served on the Department of Labor’s Whistleblower Protection Advisory Committee, which makes recommendations to the Secretary of Labor to improve OSHA’s administration of federal whistleblower protection laws. Zuckerman also served as Senior Legal Advisor to the Special Counsel at the U.S. Office of Special Counsel, the federal agency charged with protecting whistleblowers in the federal government. At OSC, he oversaw investigations of whistleblower claims and obtained corrective action or relief for whistleblowers.
Zuckerman was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” (2020, 2018, 2017, 2015, 2009, and 2007), selected by his peers to be included in The Best Lawyers in America® in the category of employment law (2011-2021) and in SuperLawyers in the category of labor and employment law (2012 and 2015-2021), is rated 10 out of 10 by Avvo, based largely on client reviews, and is rated AV Preeminent® by Martindale-Hubbell based on peer reviews
