EB-5 Related Parties Transactions

EB-5 regional centers and issuers take heed. The Securities and Exchange Commission (“SEC”) is pursuing litigation against parties in several EB-5 deals. We expect the SEC to increase efforts to prosecute regional centers, issuers and broker dealers who don’t play by the rules in the EB-5 investment industry. Mintz Levin’s EB-5 Financing Practice just released an alert on limiting securities litigation risks in EB-5 transactions. This is go-to reading for anyone in the EB-5 industry. Here are the highlights of the article, along with a few of our thoughts about concerns that borrowers need to have before accepting direct proceeds in loans from EB-5 regional centers. Continue Reading Securities Law Risk Mitigation in EB-5 Offerings

For alleged EB-5 fraudster Lin Zhong there is a cold winter ahead. A deep freeze. As we expected when news of the case recently broke, the Securities and Exchange Commission (SEC) obtained a court order freezing Zhong’s assets as well as those of her company EB-5 Asset Manager LLC. It is alleged that under the guise of the EB-5 regional center program, Zhong raised at least $8.5 million for EB-5 projects.  Zhong is accused of diverting nearly $1 million to purchase luxury personal items such as a boat, a BMW and a Mercedes. Zhong is the latest alleged EB-5 fraudster to be stopped in her tracks by the SEC.

It is clear that the SEC is now focused on prosecuting EB-5 market participants and issuers who violate the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The allegations here are similar to those alleged in recent cases – the SEC has alleged material misrepresentations and omissions to investors by Zhong.  According to the SEC’s website and recent press release, the Commission also obtained a court order appointing a receiver to administer and manage the business affairs and assets of the company and its subsidiaries for the protection of investors. Continue Reading SEC freezes assets of EB-5 Asset Manager LLC and Alleged Fraudster Lin Zhong

What do a $175,000 Sea Ray yacht, a brand new $100,000 Mercedes Benz S-550 and a $55,000 BMW X5 SUV all have in common? According to the SEC, they were all items purchased by one Lin Zhong (a/k/a Lily Zhong) with money she fraudulently obtained from investors who were told that their funds were being invested in EB-5 real estate development and construction projects. Zhong also purchased with investor funds homes for herself in Poinciana Florida and Worcester, Massachusetts – all while telling investors that 100% of their funds would be used in construction projects and that all investments would be held in escrow until their EB-5 immigration petitions were approved. Continue Reading Life is Larger than Fiction in EB-5 Litigation: SEC Moves For Asset Freeze, Accounting, and Receiver Appointment in Civil Fraud Action in Florida

Private placement offerings are an increasingly active part of the securities business. One especially complicated and emerging area of private placements is the EB-5 Investor Visa Regional Center Program. Under the current rules of the program, an investor interested in a U.S. green card may place $500,000 or $1 million into an at-risk investment, issued by or affiliated with a United States Citizenship and Immigration Services (USCIS) designated regional center. Under current law, the per investor minimum for participation in the EB-5 Program is $500,000 for an investment in a new commercial enterprise capitalizing or facilitating a project based in a rural area or in a specific geographic location of high unemployment known as a “Targeted Employment Area” (TEA). This is a downward adjustment from the $1 million that is required in any area outside a TEA. See Immigration and Nationality Act (INA), Section 203(b)(5)(B).  If job creation requirements are met as anticipated in the investment deal, an investor will be eventually eligible to secure lawful permanent residence in the U.S. Continue Reading EB-5 Due Diligence Matters: Industry at Point of Inflection Regarding Securities Compliance

EB-5 deals present risk for regional centers, issuers and investors.

With the uptick in EB-5 litigation, risk mitigation could not be more important for all stakeholders in an EB-5 transaction.

Hear from Adam Sisitsky, a member of Mintz Levin’s Securities Litigation Practice, on the three D’s of EB-5 risk mitigation: Continue Reading The Three D’s of EB-5 Risk Mitigation [VIDEO]