Feds outline City Center developer Zhong’s alleged lavish lifestyle, lies to victims
The federal investment-fraud case against absentee City Center developer Lily Zhong exposes how the businesswoman allegedly preyed upon Chinese citizens longing to live the American dream, according to the Securities and Exchange Commission.
Zhong jetted across the globe in search of investors for her EB-5 Immigrant Investor Program, leaving behind a trail of failed projects, bankruptcy and receipts for ritzy gifts she bought for herself and to woo potential investors, according to the SEC, which has frozen Zhong's assets in connection with its Nov. 3 case.
In hundreds of pages, the SEC lays out its case that Zhong raised at least $8.5 million from at least 17 investors between March 2011 and August 2014 through the EB-5 Immigrant Investor Program.
Zhong allegedly met her victims in Chinese cities such as Beijing and Shanghai, and stateside in Orlando, Palm Bay, Port St. Lucie and Stuart, according to court documents. The SEC claims Zhong used money from foreign investors, intended for Port St. Lucie's downtown City Center and for residential projects in Palm Bay, to instead purchase luxury cars and a boat.
Zhong purchased the 22 parcels that encompass Port St. Lucie's City Center — at the corner of Walton Road and U.S. 1 — two years ago for $500,000. She also set up a regional EB-5 center, a federal program that requires foreign investors to put down at least $500,000 each and create 10 American jobs per investor in exchange for green cards.
Zhong has virtually disappeared since. But she owns a home in Highland Beach in Palm Beach County and has been living part-time in Boca Raton, court documents state.
The SEC alleges she diverted nearly $1 million to buy a BMW for her daughter, a Mercedes-Benz and a 48-foot yacht. In sworn testimony at a hearing on May 28 in Miami — as part of the SEC's investigation — Zhong said her expensive lifestyle was necessary to keep investors happy and attract new business.
"Because we were going to set up the tools for people to come here, buy property, enjoy Florida life and ... (their) American dream," Zhong said of the yacht purchase.
Zhong admitted to using investors' money to buy waterfront homes, Apple products for personal use and Disney World trips for potential investors. She also paid the private-school tuition for the children of an associate, court documents show.
Zhong told investigators that four of her companies did not file federal tax returns between 2010 and 2015, according to the transcript of the hearing.
SEC documents reveal how Zhong acquired investors and what she promised them.
Yaodong Zhan, a father of an adult daughter and a former coal trader, gave Zhong $576,000, he said in a sworn hearing with SEC investigators Aug. 4 in Miami.
Yaodong said through an interpreter that he met Zhong and Stuart immigration attorney Karen Mentor in 2012 or 2013, through a friend's son, at a restaurant in the Fujian province of China, according to a transcript of sworn testimony. The friend's son highly recommended Zhong, Yaodong said.
"I forgot what she told me, but I believe her and trust her," Yaodong said.
Yaodong, who overstayed a 2013 tourist visa and applied for asylum because of political persecution, became skeptical when Zhong said construction was underway on the homes in Palm Bay. He checked and saw no development, he told SEC attorneys. Yaodong's application for asylum is still pending, he said.
"(This) behavior (and) acts made me suspicious," he said.
During his Aug. 4 testimony, Yaodong was told by SEC lawyers that Zhong was living lavishly on investor funds.
"She's very luxurious and she used our money (to go) shopping," Yaodong said.
Another of Zhong's alleged victims, Hequn Zhang, met her in September 2012 to tour Brevard County, where, Zhong said, she was to build homes.
"I would get a return on my investment from the proceeds of the sale of the homes," Hequn stated in a Sept. 11 declaration to the SEC.
After the tour, Hequn and family members were shuttled to Mentor's office in Stuart and then to a local Starbucks, where Hequn signed an escrow agreement and agreed to transfer $500,000 to Zhong, said Hequn, who currently lives in Texas. Mentor witnessed the agreement. Turns out, there was no secured escrow, the SEC claims in court documents.
Zhong during the meeting also didn't tell Hequn she had been declared bankrupt in New Zealand and had a string of failed projects overseas.
"If I had known, I would have not invested," Hequn wrote.
Hequn pleaded for justice and a refund in the declaration.
"My parents were burdened with interests on the loan they took out from the bank in China for investing in Lily's project, and my dad got lung cancer recently, which needs money urgently," Hequn said.
Both investors said they visited lavish waterfront homes owned by Zhong.
Zhong is facing six counts that she violated the Securities Act and Exchange Act, and could face an unspecified civil fine.
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