In July of this year, we wrote about a fraud action involving the EB-5 Immigrant Investor Program (“EB-5 Program” or “Program”) (here). Under the EB-5 Program, investors are eligible for permanent residency status in the U.S. if they make a qualifying investment in a new commercial enterprise in the U.S. that creates a certain number of permanent full-time jobs for qualified U.S. workers.
As we often do in our articles, we examine the legal issues involved in the case that we examine. In our July post, we examined the EB-5 Program so that our readers could gain an understanding of the program, as well as the risks of fraud and abuse attendant to the program. We repost that examination of the Program below.
The EB-5 Program and The Risk of Fraud
In 1990, Congress created the EB-5 Program to stimulate the U.S. economy through job creation and capital investment by foreign investors. The EB-5 Program offers foreign investors and members of their family an opportunity to obtain permanent residence in the United States (i.e., obtain a green card) and provides a source of financing for developers to use in, among other things, construction and business projects.
The EB-5 Program has been a material source of private investment in the U.S. for many years. According Invest in the USA, the national trade association whose members are EB-5 regional centers,1 “between 2008 and 2021, the EB-5 program helped generate $37.4 billion in foreign direct investment to create and retain U.S. jobs for Americans, all at no cost to the taxpayer” (here).
Despite the benefits of the EB-5 Program, the incidence of fraud and abuse has increased over the years.2 Typically, where fraud is involved, a company/regional center and its financial backers will solicit EB-5 Program investors with promises of high rates of return. In some cases, the companies/regional centers guarantee that the investment is risk-free.
The Securities and Exchange Commission (“SEC”) has identified a set of common violations of the securities laws arising from the misconduct surrounding the EB-5 Program. These violations include: (a) false or misleading statements in placement memoranda, subscription agreements, advertisements, and sales brochures in violation of Section 10(b)(5) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (b) theft or misuse of investor funds in violation of Section 17(a) of the Securities Act of 1933, as amended; and (c) improper solicitation of investors by unregistered broker-dealers in violation of Section 15(a) of the Exchange Act.
Due to the incidence of fraud, the SEC has released an investor alert to warn investors about potential scams in EB-5 offerings.3 The USCIS has also noted that “fraud – in the form of embezzlement, securities violations, investment schemes, and criminal conduct – has plagued the Regional Center program since its inception.” In a letter to then-President Trump, Senator Charles Grassley also noted that the EB-5 Program had “become riddled with fraud and serious vulnerabilities that present real national security concerns,” and strayed materially from its intended purpose of bringing investment to areas that need investment opportunities the most.4
Given the incidence of fraud and abuse, it is not surprising that the SEC, as well as EB-5 investors, have brought suit against individuals and companies/regional centers, claiming violations of the common law, as well as the federal securities laws. We highlight a few of the many enforcement actions brought by the SEC against EB-5 Program scammers below.
In SEC v. Marco A. Ramirez, et al., the SEC brought fraud charges against a husband and wife in Texas for stealing funds from foreign investors under the guise of an investment opportunity to create U.S. jobs and a path to U.S. residency. The SEC alleged that the couple and three companies they own fraudulently raised at least $5 million from investors by falsely promising that their money would be invested as part of the EB-5 Program. The SEC alleged that instead of investing the money as promised, the couple routinely diverted investor funds to other undisclosed businesses and for their personal use. In at least one instance, they used new investor funds to make Ponzi-like payments to an existing investor.
In SEC v. A Chicago Convention Center, et al., the SEC charged an individual living in Illinois and two companies behind an investment scheme defrauding foreign investors seeking profitable returns and a legal path to U.S. residency through the EB-5 Program. The SEC alleged that Anshoo R. Sethi created A Chicago Convention Center (“ACCC”) and Intercontinental Regional Center Trust of Chicago (“IRCTC”) and fraudulently sold more than $145 million in securities and collected $11 million in administrative fees from more than 250 investors primarily from China. Sethi and his companies allegedly duped investors into believing that by purchasing interests in ACCC, they would be financing construction of the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center near Chicago’s O’Hare Airport. According to the SEC, investors were misled to believe their investments were simultaneously enhancing their prospects for U.S. citizenship through the EB-5 Program. The SEC alleged that Sethi and his companies spent more than 90 percent of the administrative fees collected from investors despite their promise to return the money to investors if their visa applications were denied. More than $2.5 million of the funds, said the SEC, were directed to Sethi’s personal bank account in Hong Kong.
In SEC v. San Francisco Regional Center, LLC, et al., the SEC brought fraud charges against an Oakland, California-based businessman accused of misusing money he raised from investors through the EB-5 Program intended to create or preserve jobs for U.S. workers. The SEC alleged that Thomas M. Henderson and his company San Francisco Regional Center LLC falsely claimed to foreign investors that their $500,000 investments would help create at least 10 jobs within several distinct EB-5 related businesses he created, including a nursing facility, call centers, and a dairy operation. This would qualify the investors for a potential path to permanent U.S. residency through the EB-5 Program. But according to the SEC, Henderson jeopardized investors’ residency prospects and combined the $100 million he raised from investors into a general fund from which he allegedly misused at least $9.6 million to purchase his home and personal items and improperly fund several personal business projects, such as Bay Area restaurants that were unrelated to the companies he purportedly established to create jobs consistent with EB-5 requirements. According to the SEC, Henderson also improperly used $7.5 million of investor money to pay overseas marketing agents, and he shuffled millions of dollars among the EB-5 businesses to obscure his fraudulent scheme.
In SEC v. Seyed Taher Kameli, et al., the SEC charged a Chicago-based immigration attorney with defrauding investors participating in the EB-5 Program by improperly commingling and misusing a portion of the approximately $88.7 million raised. The SEC alleged that Seyed Taher Kameli and his companies, Chicagoland Foreign Investment Group, LLC and American Enterprise Pioneers, Inc., falsely claimed to at least 226 foreign investors that each of their $500,000 investments would be used to help construct a specific senior living project in the Chicago area or Florida and create at least 10 permanent full-time jobs within that project. This would qualify each investor for a potential path to permanent U.S. residency through the EB-5 Program. According to the SEC, rather than use investor funds solely for the senior living project for which an investor was solicited, Kameli diverted millions of dollars to fund other projects and to make unrelated payments, which was contrary to representations to investors and the requirements of the EB-5 Program. Kameli also allegedly spent a significant portion of investor proceeds for his own benefit, for his brother’s benefit, and for the benefit of companies he owns.
SEC. v. Ahmed
Yesterday, on November 21, 2023, the SEC announced (here) that it charged Nadim Ahmed, a New York-based businessman and his companies, NuRide Transportation Group, LLC (“NuRide”) and NYC Green Transportation Group, LLC (NYC Green”), with making fraudulent misrepresentations in securities offerings to investors seeking permanent residency through the EB-5 Program. The SEC also charged Ahmed and Mehreen Shah a/k/a Mona Shah, a New York-based immigration attorney, and her law firm with offering unregistered securities to investors in offerings that raised more than $66 million from more than 100 investors.
A copy of the complaint, which was filed in the United States District Court for the Southern District of New York, can be found here.5
According to the SEC, from approximately June 2014 through December 2018, Ahmed, NuRide and NYC Green falsely told NYC Green investors that NYC Green would be operated in a manner consistent with the requirements of the EB-5 Program and that NYC Green’s principals had contributed $11 million to the company. Further, Ahmed, NuRide, and NYC Green allegedly put key revenue-generating contracts in NuRide’s name despite telling investors that NYC Green would be the operating transportation business. Ahmed also allegedly used one investor’s funds to pay a portion of a prior settlement between another one of his companies and the SEC.
In addition, said the SEC, from June 2014 through November 2022, Ahmed, NuRide, and NYC Green, along with Shah, her law firm, and three other entities associated with Ahmed and/or Shah, allegedly offered or sold unregistered securities, including to individuals residing in the United States, in three offerings, for which no exemption to the registration requirements was available.
According to the complaint, none of the investors in the offerings has received unconditional permanent residency status or a return of their investment.
Commenting on the allegations in the complaint, Thomas P. Smith, Jr., Associate Regional Director in the New York Regional Office, said “[a]ll offering materials, including those provided to investors seeking residency under the EB-5 program, must contain accurate disclosures about the securities being issued. And all securities offerings must comply with the registration requirements or the exemptions to those requirements.”
The SEC charged Ahmed, NYC Green, and NuRide with violating the antifraud provisions and, along with Shah, her law firm, and three other entities associated with Ahmed and/or Shah, the registration provisions of the federal securities laws. The complaint seeks permanent and conduct-based injunctions, disgorgement, prejudgment interest, and civil penalties.
Footnotes
- Regional centers are businesses that offer investment opportunities under the Program. The fact that a business is designated as a regional center by the U.S. Citizenship and Immigration Services (“USCIS”) does not mean that USCIS, the SEC, or any other government agency has approved the investments offered by the business, or has otherwise expressed a view on the quality of the investment.
- See Hearing on “Citizenship for Sale: Oversight of the EB-5 Investor Visa Program” before the Senate Committee on the Judiciary on June 19, 2018 (here).
- See Investor Alert: Investment Scams Exploit Immigrant Investor Program (Oct. 9, 2013) (here).
- See Grassley to Trump: You Can Restore Integrity To EB-5 Visa Program (June 8, 2018) (here).
- The case is styled: SEC v. Ahmed, et al., 23 Civ. 10210 (S.D.N.Y. Nov. 21, 2023). It is important to remember that the complaint is merely an allegation of wrongdoing. Nothing has been proven by the SEC and no findings have been made before a trier of fact (e.g., a judge or jury).
