EB-5 Fraudster Bilked Foreign Investors Of $14.5M, SEC Says

The U.S. Securities and Exchange Commission on Wednesday accused a Washington, D.C.-based development company and its president of using the EB-5 immigrant investor program to scam foreign investors out of $14.5 million. 

Aero Space Port International Group Inc. and its president, Andy Shin Fong Chen, promised U.S.-resident hopefuls that their investments would go toward a development project linked to the EB-5 program, despite using the funds for luxury car payments, personal stock trading and operations for other companies, the SEC alleged.

“Defendants’ representations that they...would use…investors’ funds to create jobs that could support applications for permanent U.S. residency were materially false and misleading because Chen used investors’ money to benefit himself, his family and his other businesses,” the SEC said.

Chen told investors their funds would go toward the development of a Washington property known as the ASPI Commerce Park, the SEC said. This project was linked to a company that was part of the EB-5 program, which allows foreigners to obtain green cards if they invest $500,000 in a project that would create at least 10 jobs for U.S. workers in a certain type of area, according to the complaint.

From July 2011 to February 2015, Chen earned $14.5 million in investments and $1.8 million in fees from 29 investors, the SEC said.

But this money instead benefited Chen personally, going toward payments for his BMW, Apple and Visa gift cards, ASPI operating expenses and payments for other businesses Chen controlled, according to the complaint.

Chen also used the money to fund stock purchases, such as his 2012 purchase of 240,000 shares in Nokia Corporation Inc. that eventually was used as collateral to refinance his personal mortgage, the SEC said.

“Thus, in a little less than two and a half years, Chen paid out over $2.7 million to himself and various related parties, much of it in profits made by speculating with...investor money,” the SEC said.

Chen’s family also benefited from the scheme as employees and board members of ASPI, the SEC alleged. Almost $975,000 of investor funds went toward the company’s payroll, according to the complaint.

Although Chen did transfer some investor funds to the developing entity behind ASPI Commerce Park, none of the money was actually used to develop the park, the agency alleged.

The SEC also accused Chen and his company of misleading the U.S. Citizenship and Immigration Services, which oversees the EB-5 program. ASPI fraudulently maintained its eligibility in the program by failing to disclose crucial facts about how the funds were used and also caused foreign investors to file misleading residency petitions, according to the suit.

In a statement, Chen called the SEC's suit "puzzling," "egregious" and an "example of our ‘broken’ immigration system."

"The SEC cannot identify any ‘victims’ as the immigrant investors have submitted testimony and written confirmation to the SEC that they stand with the company and have no complaints about the management of the project," Chen said.

The SEC does not comment on pending litigation. 

The SEC is represented by its own John D. Worland Jr., Gregory N. Miller, Marc E. Johnson and George J. Bagnall.

Counsel information for Chen and the company was not immediately available on Wednesday.

The case is SEC v. Chen, et al., case number 2:17-cv-00405, in the U.S. District Court for the Western District of Washington.

https://www.law360.com/realestate/articles/902403/eb-5-fraudster-bilked-foreign-investors-of-14-5m-sec-says

Mentions

• Andy Chen
• Aero Space Port International Group (ASPI Group) Regional Center
• ASPI Group, Inc.
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• U.S. Citizenship and Immigration Services

Litigation Cases

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Andy Chen & Aero Space Port International Group (ASPI Group) Regional Center

States

• New York