How to Report EB-5 Visa Fraud and Earn an SEC Whistleblower Award

The EB-5 investment program, also affectionately known as the EB-5 visa-for-investment program, has experienced a dramatic increase in fraud and misrepresentation in EB-5 advertisements, EB-5 regional centers, and EB-5 projects. In 2016 alone, the SEC brought enforcement actions against nearly $1 billion worth of fraudulent EB-5 projects. The most common violations were misuse of investor funds and misrepresentations in EB-5 marketing. Notably, a majority of these schemes targeted Chinese investors, including a $136 million EB-5 real estate project, a $50 million father-daughter scheme, and a $140 million luxury real estate scheme.

According to a recent report, more than 85% of the EB-5 visas awarded in 2014 were to Chinese nationals. A Los Angeles-based immigration agent reported that U.S. green cards are attractive to Chinese investors due to “children’s education, less pollution, and transferring assets overseas.” As if the Chinese demand for EB-5 visas was not high enough, even Donald Trump’s family is making trips to China to encourage investments in the EB-5 program (although the pitch did not go over so well). The increase in Chinese demand for U.S. visas through the program has resulted in a flood of foreign investments.

According to the U.S. Citizenship and Immigration Services (USCIS), the EB-5 program has brought $8.7 billion in foreign capital into the United States since 2012. This represents a marked shift from the first 20 years of the EB-5 visa program (created in 1990), when the program was rather unpopular with foreign investors and brought in significantly less money than Congress had anticipated. Then, in 2014 and 2015, the program ran out of its annual supply of visas after a huge wave of applications from Chinese investors.

With this rise in investments, and corresponding rise in fraud, EB-5 investors should complete their own due diligence before investing in any EB-5 project or regional center. The SEC offers free investor education material. If individuals become aware of fraud, they should report their concerns immediately. Fortunately, there are many options to report the fraud, and one even provides a reward if certain criteria are met.

SEC Whistleblower Program

Under the SEC Whistleblower Program, whistleblowers are eligible to receive a reward for providing the SEC with original information about securities fraud, including EB-5 fraud. If the SEC uses a whistleblower’s information to bring a successful enforcement action, the whistleblower is eligible to receive 10% to 30% of the monetary sanctions collected as an award. In fact, one tip about EB-5 fraud has already resulted in a $14.7 million SEC award.

Since the enactment of the whistleblower program, the SEC has paid more than $150 million to whistleblowers. The largest award to date is more than $30 million. These tips from whistleblowers have lead the SEC to successful enforcements actions resulting in more than $953 million in financial remedies.

The SEC Whistleblower Program protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Moreover, a whistleblower can submit an anonymous tip to the SEC if represented by counsel. In certain circumstances, a whistleblower may remain anonymous, even to the SEC, until an award determination. However, even at the time of an award, a whistleblower’s identity is not made available to the public.

To report EB-5 fraud and qualify for an award under the Whistleblower Program, the SEC requires that whistleblowers or their attorneys report the tip online through the SEC’s Tip, Complaint or Referral Portal or mail/fax a Form TCR to the SEC Office of the Whistleblower.

USCIS & FTC

Individuals can also report EB-5 fraud through USCIS who administers the EB-5 program. USCIS takes allegations regarding EB-5 fraud very seriously. In fact, USCIS established a division in 2004, the Office of Fraud Detection and National Security (FDNS), dedicated to detecting, deterring and combating immigration benefit fraud. Moreover, USCIS conducts EB-5 regional center compliance audits to further enhance the integrity of the EB-5 program.

Individuals can also report scams to the Federal Trade Commission (FTC). The FTC offers an online assistant that allows individuals to report issues with immigrations services in six quick steps.

Unlike the SEC Whistleblower Program, however, USCIS and FTC do not offer rewards for reporting EB-5 fraud.

Investor Alert About EB-5 Fraud

In 2013, USCIS teamed up with the SEC to issue an investor alert about the rise in EB-5 fraud (which is also offered in Chinese). The alert offers investors practical steps to take to research EB-5 investments.  The alert also details common misconceptions about the program, including that “the fact that a business is designated as a regional center by USCIS does not mean that USCIS, the SEC, or any other government agency has approved the investments offered by the business, or has otherwise expressed a view on the quality of the investment.” Recent testimony on the EB-5 immigrant investor program also exposes some of the common schemes that investors should be aware of prior to investing.

http://www.natlawreview.com/article/how-to-report-eb-5-visa-fraud-and-earn-sec-whistleblower-award

Mentions

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• U.S. Citizenship and Immigration Services

States

• New York