SEC Says Bid To Toss $350M EB-5 Suit Built On Errors

SEC Says Bid To Toss $350M EB-5 Suit Built On Errors

EB-5 Visa, EB5 Visa, EB-5 Investment

The U.S. Securities and Exchange Commission Tuesday called a motion by Jay Peak ski resort owner Ariel Quiros for dismissal of claims he engaged in a $350 million fraud scheme targeting participants in the EB-5 immigrant investor program a collection of incorrect legal assertions. 

The SEC argued Quiros’ claims that the fraud allegations are time-barred and not specific enough “demonstrate a vast misunderstanding or erroneous assertions of what the law requires.”

“Defendant Ariel Quiros’ Motion to Dismiss is meritless — nothing more than a mix of incorrect legal assertions about the pleading standards Plaintiff Securities and Exchange Commission must satisfy and improper attempts to have the Court resolve disputed issues of fact,” the SEC said in its motion.

The SEC claims that Quiros and William Stenger, through various companies including Jay Peak and Q Resorts Inc., took in $350 million from hundreds of investors hoping to obtain visas through the EB-5 program, which rewards job-creating investments in the United States. The agency claimed the two used $200 million of those funds in a “Ponzi-like fashion” to cover losses in unrelated projects and to pay for $50 million in Quiros' personal expenses.

In late June, Quiros moved to dismiss the SEC’s amended complaint, arguing it suffered from “general incoherence” and “legal infirmities.” He also said many of its claims are time-barred by a recent Eleventh Circuit decision and that the others lack particularity.

The SEC argued that time bar only applies to its disgorgement claims, not its injunctive relief claims, and that the claims accrued not on the first date the securities were offered for sale, as Quiros argued, but on the last date he’s alleged to have misappropriated funds.

The SEC said Quiros’ claims of lack of particularity are also wrong, arguing it had detailed specific falsehoods in the offering documents and fraudulent acts by Quiros. The agency also argued Quiros repeatedly asked the court to accept his assertions on and interpretations of disputed facts.

The SEC also claimed Quiros’ motion misinterprets the law, incorrectly claiming he was liable only if he personally made misrepresentations and only for actions taken before he received the investor’s funds.

“Quiros misstates virtually every legal standard applicable to securities fraud under Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5,” the SEC said.

Quiros is facing suits over similar allegations from the state of Vermont, a court-appointed receiver in Florida’s Southern District, and four sets of proposed class actions plaintiffs. One set voluntarily dismissed their claims last month after asking the Judicial Panel on Multidistrict Litigation to consolidate the cases.

Counsel for Quiros did not immediately respond to requests for comment Wednesday.

The SEC is represented by Christopher E. Martin and Robert K. Levenson.

Quiros is represented by Karen L. Stetson and Jonathan L. Gaines of GrayRobinson PA, Scott B. Cosgrove and  James R. Bryan of Leon Cosgrove LLC and David B. Gordon and John S. Durrant of Mitchell Silberberg & Knupp LLP.

The case is Securities and Exchange Commission v. Ariel Quiros et al., case number 1:16-cv-21301, in the U.S. District Court for the Southern District of Florida.


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