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SEC Charges South Florida Individuals and Entities in Eb-5 Investment Scheme

SEC Charges South Florida Individuals and Entities in Eb-5 Investment Scheme

EB-5 Visa, EB5 Visa, EB5 Investments

On August 3, 2018, the Securities and Exchange Commission charged two Florida residents in a securities offering fraud targeting immigrant investors.

According to the SEC's complaint, over a period of more than two years, Joseph J. Walsh and Robert V. Matthews defrauded dozens of foreign investors participating in the EB-5 program administered by the United States Citizenship and Immigration Services, which provides foreign nationals with an opportunity to qualify for permanent U.S. residency by investing in domestic, job-creating projects. According to the SEC's complaint, Walsh raised close to $44 million from foreign investors which, through a loan, was to be used to acquire, develop, and operate a Palm Beach hotel controlled by Matthews. The complaint alleges that Walsh misappropriated more than $13 million of the investor funds and that Matthews misappropriated approximately $8 million, some of which he used to acquire a 151-foot yacht and to purchase his former Connecticut home out of foreclosure. According to the SEC's complaint, Walsh and two companies he controlled - Palm House Hotel LLLP (PHH) and South Atlantic Regional Center, LLC (SARC) - also misled investors about the use of an escrow account that purportedly held investor funds prior to disbursement to the hotel, and about Walsh's and Matthews' backgrounds.

The SEC's complaint, which was filed in the Southern District of Florida, charges Walsh, PHH, and SARC with violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement of ill-gotten gains with interest, and penalties. The SEC's complaint also charges Matthews with violating Sections 17(a)(1) and (a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder and with aiding and abetting PHH, SARC, and Walsh's violations of Section 17(a)(2) of the Securities Act and Section10(b) of the Exchange Act and Rule 10b-5(b) thereunder. In addition, the SEC's complaint also charges as relief defendants 160 Royal Palm, LLC and United States Regional Economic Development Authority LLC d/b/a EB5 Petition for the sole purpose of recovering investor funds they received from Walsh and his entities or Matthews.

The SEC's investigation was conducted by Shelly-Ann A. Springer-Charles, Timothy J. Galdencio, and Crystal C. Ivory and was supervised by Eric R. Busto. The SEC's litigation will be led by Alejandro Soto. The SEC appreciates the assistance of the United States Citizenship and Immigration Services.


https://www.sec.gov/litigation/litreleases/2018/lr24224.htm

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