Understanding EB-5 Securities – NYU Stern Database of SEC EB-5 Securities Enforcement Actions

An immigrant’s investment through the EB-5 Regional Center Program constitutes a security for purposes of the federal securities laws (sometimes

referred to as an “EB-5 security”). The immigrant investor’s goal - to obtain a visa - is fundamentally different than the goal of a conventional investor who invests in non-EB-5 securities to maximize his economic return. This difference justifies a closer examination, from an EB-5 perspective, of the federal securities laws and recent enforcement actions brought by the U.S. Securities and Exchange Commission (“SEC”) as a result of fraud and the misappropriation of the investors’ funds. Thus, we have designed and compiled a Database of these actions that helps to identify important trends and developments.

As explained in the “Special Vulnerability of EB-5 Investors“ section of this paper, the overlay of the immigration process makes the EB-5 investors as a class particularly vulnerable to securities fraud. Even though the EB-5 investor possesses the legal right under the federal securities laws to sue the wrongdoers, the typical EB-5 investor is reluctant to sue because he believes that the lawsuit might adversely affect his ability to obtain the visa. Similarly, the investor is reluctant to report a potential fraud to the USCIS or SEC. Thus, the SEC’s aggressive pursuit of fraud plays a vital role in protecting EB-5 investors against the misappropriation of their funds.