On October 1st, 2013, USCIS released an “Investor Alert” to warn potential and active EB-5 investors of fraudulent EB-5 projects which seek to exploit immigrant investors. The alert followed an investigation by the U.S. Securities and Exchange Commission (SEC) into an allegedly fraudulent EB-5 regional center scheme in Texas called the USA Now Regional Center, run by Marco and Bebe Ramirez in McAllen, Texas. The couple had applied for USCIS approval of their regional center in 2010, but, according to reports, they began attracting investors under false pretenses before the regional center was actually registered with USCIS.

According to the SEC report, the couple primarily targeted immigrant investors in Mexico, Egypt, and Nigeria, and diverted the investors’ funds to their other businesses for personal use, using the funds to open a restaurant unbeknownst to investors, and even to set up a Ponzi-like scheme to pay existing investors. Investors were told that their investments would be held in escrow and, upon release of the funds from escrow, this money would be used for business purposes only. However, the Ramirezes did not hold these funds in escrow and began to appropriate the funds for their own use and even began diverting funds on the same day that the investors made their initial investments. At the time of the SEC’s investigation, the Ramirezes had scammed about 10 investors, all of whom have yet to have been granted conditional permanent residency. The U.S. District Court for the Southern District of Texas is investigating the SEC’s claims and have approved the SEC’s request to freeze the assets and accounts of USA Now Regional Center, as well as the Ramirezes’ two other companies, USA Now Energy Capital Group LP and Now Co. Loan Services. The Ramirezes are charged with violating and aiding and abetting violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 and the complaint seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

The SEC’s investigation into the Ramirezes’ EB-5 project comes just eight months after the SEC brought a suit against A Chicago Convention Center, LLC and Intercontinental Regional Center Trust of Chicago, a fraudulent regional center scheme run by Anshoo Sethi in Illinois. Sethi mainly targeted wealthy Chinese investors by making false claims and convincing investors that they would be investing in the world’s first zero carbon emission platinum LEED certified hotel and conference center while pursuing a path to citizenship through the EB-5 program. Sethi and his companies even falsified documents which they provided to USCIS to seek approval for their regional center. If you would like to learn more details about that issue, you may read one previous article by clicking the following link:

http://www.hooyou.com/news/news2013/news021513eb5.html

Sethi’s scheme was much more large-scale than the Ramirezes’ project, targeting over 250 investors and fraudulently selling more than $145 million in securities and collecting $11 million in administrative fees, charging $41,500 in “subscription” administrative fees per investor. While investors were promised that their administrative fees would be returned to them in the event that their visa applications were denied, Sethi had already begun funneling more than $2.5 million of these funds into his personal bank account in Hong Kong. While the U.S. District Court ordered the return of more than $147 million in funds held in escrow to the defrauded investors, many investors may lose the thousands of dollars in “administrative fees” which were not held in escrow.

While these SEC investigations into EB-5 projects may seem to bring into question the credibility of the EB-5 program, such investigations are beneficial and necessary to maintain the ultimate purpose of the program of creating U.S. jobs and opening a path to citizenship for immigrant investors who decide to invest in the U.S. As the EB-5 program has grown exponentially over the past few years, fraudulent principals have become increasingly interested in seeking to make a quick profit by abusing the system and attempting to defraud immigrant investors of their money. However, these recent highly publicized SEC investigations into EB-5 projects will help to maintain the integrity of the program and serve as a warning to anyone hoping to abuse the process for his or her own personal gain. With the increased scrutiny of the SEC, EB-5 project managers and investors are becoming more aware of their duty to adhere to securities laws, which will only help to make the EB-5 process a more transparent and legitimate one.

While potential immigrant investors may be weary to invest in regional centers following the recent exposures of these two fraudulent schemes, it is important to remember that investing in a regional center is only one option available to immigrants seeking to participate in the EB-5 program. Alternatively, immigrant investors can choose to make a direct investment in a new, restructured, or troubled enterprise. While an investment in a regional center allows the ten required jobs to be created either directly or indirectly, provides an existing business model into which an immigrant can invest, and removes the requirement that the investor have an active role in the daily operations of the business, the removed nature of such an investment creates a lack of oversight and a degree of non-transparency for investors who may not know exactly how their investments are being used or whether the regional center project will exist long enough to ensure the immigrant investor’s two-year conditional permanent residency and eventual indefinite green card approval. While choosing the direct investment path requires an investor to directly create ten jobs and to be involved in the everyday management of the business, this method allows for much greater control over the investment and reduces the chances for the misappropriation of an immigrant’s funds. In addition, the franchise model of direct investment allows for an immigrant investor to invest in an existing chain with a proven business model, and many franchisors will provide investors with tools and management guidance to ensure the success of the franchise. If you would like to learn more details about that issue, you may read an article by clicking the following link:

http://www.hooyou.com/news/news2012/news122812eb5.html

Zhang & Attorneys has experience in helping investors determine which method of investment best suits their immigration needs and business experience. Our knowledgeable attorneys will work with you to find a reputable and viable investment project and carry out our own due diligence to ensure that your needs as an immigrant investor are met. It is important to note that we do not receive kickbacks from regional centers and we will always pass on any inducements we receive to our clients. If you are interested in the EB-5 program and would like to know more about the immigrant investor visa, please contact us at info@hooyou.com.

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Founded in 1996, Zhang & Associates, P.C. offers legal services to clients nationwide in all aspects of U.S immigration law. We have successfully handled thousands of immigration cases.

At Zhang & Associates, P.C., our attorneys and supporting professionals are committed to providing high-quality immigration and non-immigration visa services. We specialize in NIW, EB-1, PERM, and I-485 cases. In the past seventeen years, we have successfully helped thousands of clients get green cards. If you plan to apply for a green card, please send your CV to Attorney Jerry Zhang (info@hooyou.com) for a free evaluation.

Zhang & Associates, P.C.

Silicon Valley • New York • Los Angeles • Chicago • Houston • Austin • Seattle

Tel:	1-800-230-7040, 713-771-8433
Email:	info@hooyou.com
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(10/08/2013)