EB-5 investment fraud is a securities violation in which promoters, regional centers, or other parties deceive foreign investors participating in the Immigrant Investor Program. The EB-5 Immigrant Investor Program was designed to create economic opportunity for the United States. Instead, it has become a target-rich environment for fraudsters who exploit foreign nationals seeking the American dream. If you invested hundreds of thousands of dollars in an EB-5 program only to discover your funds were misappropriated, you may have legal options to recover your losses.
At Varnavides Law, we represent investors in California, New York, and New Jersey who have been defrauded through EB-5 schemes, regional center fraud, and related securities violations. Our founder, Gary Varnavides, spent 10 years defending broker-dealers and financial institutions at Sichenzia Ross Ference LLP. That experience on the other side gives us unique insight into how these schemes operate and how to build winning cases for our clients.
Key Takeaways
- The SEC has pursued enforcement actions against nearly $1 billion in fraudulent EB-5 projects in recent years
- Common fraud types include fund misappropriation, Ponzi schemes, and false visa guarantees
- Defrauded investors may recover losses through FINRA arbitration or securities litigation
- The EB-5 Reform and Integrity Act of 2022 provides new investor protections
- An experienced securities litigation attorney can help identify all liable parties
Understanding EB-5 Investment Fraud
EB-5 investment fraud occurs when promoters, regional centers, or other parties deceive foreign investors participating in the Immigrant Investor Program. According to USCIS, fraud in the form of embezzlement, securities violations, investment schemes, and criminal conduct has plagued the Regional Center program since its inception.
These schemes are particularly devastating because victims face dual losses. Not only do they lose their investment capital, often $500,000 to $1,050,000 or more, but they may also lose their opportunity for permanent U.S. residency. When promoters misappropriate funds or fail to create the required jobs, the entire immigration case can collapse.
Warning: No investment promoter can guarantee a visa or permanent residency in exchange for an EB-5 investment. Any such promise is a major red flag for fraud, according to Investor.gov.
How the EB-5 Immigrant Investor Program Works
Congress created the EB-5 program in 1990 to stimulate the U.S. economy through foreign investment and job creation. According to the EB-5 Immigrant Investor Program guidelines, the program allows foreign nationals and their families to obtain permanent U.S. residency by investing in American commercial enterprises.
Current Investment Requirements
| Investment Type | Minimum Investment | Visa Set-Aside |
|---|---|---|
| Standard Investment | $1,050,000 | None |
| High Unemployment TEA | $800,000 | 10% |
| Rural TEA | $800,000 | 20% |
| Infrastructure Project | $800,000 | 2% |
Investors must also demonstrate that their investment creates or preserves at least 10 permanent full-time jobs for qualified U.S. workers. Many investors choose to invest through USCIS-approved regional centers, which pool funds from multiple investors into larger projects.
Common Types of EB-5 Fraud Schemes
EB-5 fraudsters employ various deceptive tactics to steal investor funds. Understanding these schemes can help you recognize if you have been victimized.
Fund Misappropriation
Promoters divert investor capital to personal expenses, luxury items, or unrelated projects instead of the promised development. The SEC has documented cases where operators used EB-5 funds to purchase personal residences, vehicles, and real estate investments that had nothing to do with the stated project.
Ponzi-Style Operations
Some schemes use new investor funds to make payments to earlier investors, creating the illusion of returns while the project never materializes. The Vermont Jay Peak fraud, which affected 529 investors and involved over $350 million, operated partially as a Ponzi scheme.
False Visa Guarantees
Fraudsters promise guaranteed green cards or permanent residency, which no private party can lawfully promise. These false assurances convince investors to part with their money without proper due diligence on the underlying investment.
Unregistered Securities
Many EB-5 offerings are securities that must be registered with the SEC or qualify for an exemption. Operating without proper registration exposes investors to heightened fraud risk and provides additional legal claims when things go wrong.
Warning Signs of EB-5 Investment Fraud
The SEC and USCIS have identified specific red flags that may indicate an EB-5 investment is fraudulent. If you encountered any of these warning signs before investing, you may have grounds for a claim based on breach of fiduciary duty or misrepresentation.
Key Red Flags to Watch For:
- Promises of guaranteed visa approval or permanent residency
- Guaranteed investment returns regardless of market conditions
- Overly consistent or unusually high returns
- Unlicensed sellers or unregistered investment firms
- Complex corporate structures with undisclosed conflicts of interest
- Pressure to invest quickly without time for proper due diligence
- Regional centers not verified on the official USCIS list
- Lack of clear documentation about how funds will be used
SEC Enforcement Actions Against EB-5 Fraud
The Securities and Exchange Commission has aggressively pursued EB-5 fraud cases. According to SEC enforcement data, the agency brought actions against nearly $1 billion worth of fraudulent EB-5 projects in 2016 and 2017 alone. This enforcement activity has continued with significant cases in recent years.
Notable SEC Enforcement Cases
| Case | Amount | Fraud Type |
|---|---|---|
| Jay Peak (Vermont) | $350 million | Ponzi scheme, fund misappropriation |
| Ariel Quiros (2018) | $50+ million | Unauthorized purchases, personal use |
| CMB Export (2018) | $11.585 million penalty | Unregistered securities |
| 2024 Nevada Case | $10 million | Collateral for unrelated debt |
The Jay Peak case demonstrates how devastating these schemes can be. Affected investors have received only about 29 percent of their original $500,000 investments, and some still await resolution of their immigration status years later.
For example, in SEC v. Quiros, the Commission alleged that Ariel Quiros and his associates misused over $200 million in investor funds intended for ski resort development projects in Vermont. The SEC charged them with securities fraud, and the case resulted in a settlement of $2.1 million in disgorgement.
How EB-5 Fraud Affects Investors
The consequences of EB-5 fraud extend far beyond financial losses. Victims often face multiple devastating outcomes that can affect their families for years.
Financial Devastation: Investors may lose their entire investment of $500,000 to $1,050,000 or more. Many families have saved for years or liquidated assets to make this investment, only to see it stolen by unscrupulous promoters.
Immigration Failure: When projects fail to create the required jobs or funds are misappropriated, USCIS may deny visa petitions. Families who relocated based on expected residency may face deportation and the complete disruption of their lives.
Emotional Trauma: The combination of financial loss and shattered immigration dreams creates significant emotional distress. Many victims trusted these programs as their path to a better life for their families.
Legal Claims Available to Defrauded EB-5 Investors
Victims of EB-5 fraud may have multiple avenues for recovery. The specific claims available depend on who was involved in selling the investment and what representations were made.
Securities Fraud Claims
If the EB-5 investment qualifies as a security, which most do, investors may pursue claims under federal and state securities laws. These claims can target the promoters, regional centers, and any broker-dealers or investment advisors who recommended the investment.
FINRA Arbitration Claims
If a FINRA-registered broker-dealer sold the EB-5 investment, investors can pursue claims through FINRA arbitration. According to FINRA, common claims include:
- Misrepresentation: False statements about the investment, returns, or visa likelihood
- Unsuitability: Recommending an investment inappropriate for the investor’s situation
- Breach of Fiduciary Duty: Failing to act in the investor’s best interest
- Failure to Supervise: Brokerage firm liability for inadequate oversight
- Regulatory Violations: Non-compliance with securities laws and regulations
Common Law Claims
Beyond securities-specific claims, victims may pursue common law causes of action including fraud, negligent misrepresentation, breach of contract, and unjust enrichment. These claims can reach parties who might not be subject to securities laws.
FINRA Arbitration for EB-5 Investment Losses
When broker-dealers are involved in selling EB-5 investments, FINRA arbitration often provides the most effective path to recovery. This is especially true because account opening agreements typically require arbitration for disputes.
FINRA Arbitration Benefits: Arbitration is often faster and less expensive than federal court litigation. Decisions are binding, and recovery comes directly from the brokerage firm, which typically has deeper resources than individual fraudsters.
At Varnavides Law, we have extensive experience with investment fraud claims through FINRA. Gary Varnavides spent a decade defending these exact cases, giving us unparalleled insight into how brokerage firms approach their defense and where their vulnerabilities lie.
Why Choose an Experienced Securities Litigation Attorney
EB-5 fraud cases involve complex intersections of securities law, immigration law, and international transactions. Successful recovery requires an attorney who understands all these dimensions.
Securities Law Expertise
- Understanding of SEC regulations and enforcement trends
- Experience with FINRA arbitration procedures
- Knowledge of broker-dealer liability standards
- Familiarity with securities fraud elements and damages
Insider Knowledge
- Understanding of how defendants structure their defenses
- Knowledge of industry practices and standards
- Ability to identify all potentially liable parties
- Experience negotiating with major financial institutions
The EB-5 Reform and Integrity Act of 2022
Congress enacted the EB-5 Reform and Integrity Act (RIA) in March 2022 as part of comprehensive immigration reform. According to USCIS, this legislation represents the first significant effort to address fraud in the EB-5 program and provides important new protections for investors.
Key Investor Protections Under the RIA
- Enhanced Regional Center Oversight: New compliance requirements and auditing standards
- Investor Fund Protections: Requirements for how investor funds must be held and used
- Disclosure Requirements: Mandatory disclosure of conflicts of interest and fees
- Fraud Prevention Measures: Background check requirements for principals
- Visa Set-Asides: Reserved visas for rural and high-unemployment areas
While the RIA provides important forward-looking protections, investors who were defrauded before its enactment still need experienced legal counsel to recover their losses through existing legal remedies.
How Varnavides Law Can Help
If you have lost money in an EB-5 investment fraud scheme, Varnavides Law can evaluate your case and pursue recovery through all available legal channels. We represent clients throughout California, New York, and New Jersey.
Our Approach to EB-5 Fraud Cases
- Comprehensive Case Evaluation: We analyze all transaction documents, identify liable parties, and assess potential claims
- Multi-Party Investigation: We investigate the regional center, promoters, broker-dealers, and any other parties who may share liability
- Strategic Claim Selection: We choose the forum and claims most likely to result in maximum recovery
- Aggressive Prosecution: We leverage Gary’s decade of defense experience to anticipate and counter opposition strategies
Gary Varnavides brings unique perspective to these cases. Having spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers and financial institutions, he knows how the other side thinks and prepares. This insider knowledge translates directly into more effective advocacy for our clients. Gary is a Super Lawyers Rising Star (2015-2023) and is licensed to practice in California, New York, and New Jersey.
Protect Your Investment
If you have been victimized by EB-5 investment fraud, time is critical. Statutes of limitations may limit your ability to recover. Contact Varnavides Law today for a free consultation to discuss your case.
Frequently Asked Questions About EB-5 Investment Fraud
What should I do if I suspect my EB-5 investment was fraudulent?
First, gather all documentation related to your investment, including the private placement memorandum, subscription agreements, wire transfer records, and all communications with the regional center or promoters. You should also report the fraud to USCIS, the SEC, and your state securities regulator. Then contact an experienced securities litigation attorney to evaluate your recovery options before statutes of limitations expire.
Can I recover my EB-5 investment losses through FINRA arbitration?
If a FINRA-registered broker-dealer was involved in selling your EB-5 investment, you may have claims that can be pursued through FINRA arbitration. This includes claims for misrepresentation, unsuitability, breach of fiduciary duty, and failure to supervise. The brokerage firm can be held liable for the actions of its registered representatives and for its own supervisory failures.
What is the statute of limitations for EB-5 fraud claims?
Statutes of limitations vary depending on the type of claim and jurisdiction. Federal securities fraud claims generally have a two-year discovery rule with a five-year absolute limitation. State law claims may have different periods. Some claims may be tolled due to fraudulent concealment. It is critical to consult with an attorney promptly to preserve all potential claims.
Who can be held liable for EB-5 investment fraud?
Multiple parties may share liability for EB-5 fraud, including the regional center and its principals, project developers, broker-dealers who sold the investment, individual brokers or advisors who recommended it, attorneys or CPAs who provided false opinions, and any other parties who participated in or aided the fraud.
How much does it cost to pursue an EB-5 fraud claim?
At Varnavides Law, we handle most EB-5 fraud cases on a contingency fee basis. This means we only get paid if we recover money for you. The fee percentage is discussed during your free consultation. You remain responsible for case costs, which may include filing fees, expert witnesses, and deposition transcripts. We can discuss cost estimates and payment arrangements during your consultation.
What if the fraudsters have already been criminally prosecuted?
Criminal prosecution does not prevent you from pursuing civil claims for your losses. In fact, criminal convictions can sometimes help civil cases by establishing that fraud occurred. However, criminal restitution rarely covers full investor losses, and civil litigation can reach additional parties like brokerage firms who have greater resources to pay judgments.
Can I still get my green card if my EB-5 investment was fraudulent?
This depends on your specific situation and the stage of your immigration case. USCIS has made accommodations for some fraud victims, particularly in large cases like Jay Peak. An immigration attorney can advise on your options. Pursuing civil recovery does not prevent you from also working on your immigration case.
How does the EB-5 Reform and Integrity Act help fraud victims?
The RIA primarily provides forward-looking protections for new investors through enhanced oversight and disclosure requirements. For existing fraud victims, the RIA does not create new recovery mechanisms. However, an experienced attorney can help you pursue all available claims under existing securities laws, FINRA rules, and state common law.
