SEC Whistleblower Program as a Valuable EB-5 Securities Anti-Fraud Enforcement Tool

June 21, 2018

Download: SEC_Whistleblower_Program_as_a_Valuable_EB-5_Securities_Anti-Fraud_Enforcement_Tool_rev_6.27.2018.pdf

EB-5 immigrant investors have few protections against fraud and other bad acts committed by regional center operators and related parties. Since 2015, the EB5 industry has successfully repelled various legislative reform proposals by Congress that would have imposed integrity measures, if enacted into law. The most important of these measures, third-party fund administration and account transparency, were aimed at detecting and curbing these abuses much earlier than might otherwise be possible. Fortunately, the SEC Whistleblower Program (sometimes referred to as the “Program”) has proven to be a powerful weapon in the SEC’s toolbox to combat securities fraud in the EB-5 arena and to provide an avenue for EB-5 investors to obtain relief. The Program authorizes the SEC (sometimes referred to as the “Commission”) to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful judicial enforcement or administrative actions4 brought by the SEC resulting in monetary sanctions over $1 million. 

In March 2018, the SEC paid nearly $83 million in awards to three whistleblowers who provided tips leading to a SEC administrative order against Merrill Lynch for violations of the federal securities laws in which the SEC collected $415 million. These awards represented the largest awards in the history of the Program. We expect that in the coming months the SEC will pay another large award to one or more whistleblowers who provided the tips that led to the uncovering of the massive EB-5 securities fraud in connection with the Jay Peak ski resort and related projects. In February 2018, monetary sanctions totaling almost $84 million were imposed upon Ariel Quiros, the chairman of Jay Peak.

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