In its continuous efforts to identify and prosecute EB-5 investment fraud, the Securities and Exchange Commission recently announced that it settled securities fraud charges against three Houston-area real estate developers alleging misuse of investor capital raised from approximately ninety Chinese investors under the EB-5 Immigrant Investor Program.
Under the terms of the SEC settlement, the real estate developers agreed to repay the $49.5 million they solicited and raised from the Chinese investors. Per the SEC’s Order, the real estate developers represented to investors that their investment funds would be solely used for a EB-5 real estate project; instead, the SEC alleged, the developers wrongfully misdirected $20.5 million of investor capital for improper uses, including funding unrelated real estate projects. The SEC additionally claimed that the offering materials used to market the EB-5 investment opportunity improperly identified two real estate experts’ roles and titles.
The SEC’s Order finds the real estate developers violated the antifraud sections of Section 17(a)(2) and Section 17(a)(3) of the Securities Act of 1933, statutory provisions that do not require a finding of scienter, or intent to deceive or defraud. With neither admitting nor denying the SEC’s conclusions, the defendants consented to the imposition of a cease-and-desist order, and collectively agreed to pay disgorgement of $49.5 million, which was deemed satisfied by virtue of their pre-settlement repayments to investors, prejudgment interest and a civil penalty of $800,000.00.
The SEC has brought several EB-5 investment offering fraud cases to date and appears to be intent on continuing to aggressively investigate and, where appropriate, prosecuting such cases. The SEC’s enforcement focus on EB-5 securities offerings stems from its concern that investor funds are being misused and misappropriated, and that the immigration program is being abused.
My law firm represented an EB-5 real estate developer in one of the first cases brought by the Miami Office of the SEC in the Southern District of Florida, which has since been resolved.
If you are under investigation by the SEC in connection with an EB-5 investment, it is imperative that you are represented by a seasoned SEC defense lawyer who can provide you critical advice and strategic counsel to protect your legal interests. SEC defense lawyer David Chase, a former SEC Prosecutor, understands how the SEC investigates and prosecutes its EB-5 cases. The Law Firm of David R. Chase, an SEC defense law firm located in South Florida, is headed by SEC defense lawyer, David Chase, who represents those under SEC EB-5 investigations around the nation. Call Mr. Chase toll-free at: 800-760-0912 for a confidential and no cost initial consultation, or at email@example.com.