Compliance: Due diligence and common sense with an EB-5 investment

Part six of the series "Successfully Petitioning for an EB-5 Visa," providing a due diligence checklist for those looking to make an investment through the EB-5 program

Due diligence is obviously required for any substantial investment, but when it comes to making an EB-5 investment, extraordinary precautions should be taken. This is because an EB-5 investment not only puts a significant amount of capital at risk, like any other big investment, it must also satisfy all of the strict requirements of the EB-5 Program. In other words, if an EB-5 investment turns out to be fraudulent, investors risk losing both their money and their path to permanent residency.

An excellent illustration of what can happen to unwary EB-5 investors is the recent case involving the Intercontinental Regional Center Trust of Chicago (IRCTC). The Securities and Exchange Commission (SEC) alleges that Anshoo R. Sethi fraudulently sold more than $145 million in securities in the IRCTC, and that he collected $11 million in administrative fees from more than 250 investors that were primarily from China. Each investor put up a $500,000 investment, plus $41,500 in “administrative fees.” Sethi allegedly duped investors into believing that by purchasing interests in a company known as “a Chicago Convention Center” (ACCC), they would be financing construction of a major hotel and conference center near Chicago’s O’Hare Airport.

Verify the satisfaction of the job-creation requirement

The USCIS requires that an EB-5 project demonstrate that the requisite number of jobs be created within 2.5 years of the approval of the I-526. One of the benefits of investing in a Regional Center is that this job-creation requirement can be satisfied through the creation of indirect jobs, which are jobs created collaterally or as a result of capital invested in a commercial enterprise affiliated with a Regional Center.

Contributing Author

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Jeffrey C.P. Wang

Jeffrey C.P. Wang is the managing partner and founder of WHGC, P.L.C. Mr. Wang's practice focuses on handling the legal concerns of international and domestic...

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Contributing Author

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John Frederick Karch

John Frederick (Rick) Karch is a partner at WHGC, P.L.C. and a member of the International Corporate Transaction Group. His practice focuses on financial and...

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