SEC freezes assets of Path America after filing civil suit

The USCIS can deny residency applications if investors’ money is used for something that materially departs from an approved business plan.

The Securities and Exchange Commission (SEC) has frozen the assets of Path America in response to an alleged scheme to defraud investors trying to get U.S. residency.

A Washington State federal court approved the asset freeze and will prevent those responsible from soliciting additional investors.

Company CEO Lobsang Dargey also had his assets frozen by the SEC action as part of the government’s investigation into the defrauding of Chinese investors who were seeking U.S. residency through the EB-5 Immigrant Investor Pilot Program after investing in the companies.

Dargey and the “Path America” companies raised $125 million or more for a commercial building (called Potala Tower) in downtown Seattle and a commercial and residential complex, complete with a farmer’s market, in Everett, Wash.

But the SEC claims not all of the money made it to the real estate projects. Dargey allegedly spent $14 million for unrelated real estate projects and $3 million for “personal use” such as for him buying a $2.5 million house, as well as “cash withdrawals at casinos,” the SEC said. The total misappropriated amount was $17.6 million, the SEC claims.

Also, Dargey withdrew investor funds of more than $200,000 while at 14 different casinos in Washington, Nevada, California and British Columbia, Canada, the SEC adds.

The two official real estate projects were approved to be funded by the EB-5 visa program. The U.S. government program lets investors apply for permanent residency (through a green card) after investing at least $500,000 or more (typically at least $1 million) in a commercial project that leads to or preserves 10 or more jobs.

“We allege that Dargey promised investors their money would be used to develop specific real estate projects approved under the EB-5 program, but he misused millions of dollars to enrich himself and jeopardized investors’ prospects for U.S. residency,” Jina L. Choi, director of the SEC’s San Francisco office, said in a statement.

The SEC claims Dargey and his companies raised money from 250 Chinese investors through the EB-5 program.

The United States Citizenship and Immigration Services (USCIS) can deny residency applications if the investors’ money is used for something that materially departs from an approved business plan. 

In a related court action brought by the SEC against the companies and Dargey, the government claims the defendants “have exploited a federal visa program to defraud investors seeking investment returns and a path to United States residency. To date, defendants have fraudulently raised at least $125 million through their sales of securities to 250 investors and collected at least $11 million in additional fees.” Most of the victims are foreign nationals seeking U.S. residency, with most being Chinese citizens. The defendants also made “materially false and misleading statements and omissions of material facts to solicit investors for the real estate projects,” the SEC said.

Meanwhile, Path America denies any wrongdoing. “We have instructed our counsel to cooperate with the SEC while aggressively defending the company, and are confident that at the end of the day the SEC’s allegations will be disproved,” Path America said in a statement that was reported by the Seattle Times.

On its website, Path America says it uses the “EB-5 program to help individuals and/or families who wish to live in the United States gain permanent resident status. We understand that this transition can be challenging, and our goal is to make it as seamless as possible.”

http://www.insidecounsel.com/2015/09/03/sec-freezes-assets-of-path-america-after-filing-ci

Mentions

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• Path America
• Potala Tower Seattle
• Lobsang Dargey
• U.S. Citizenship and Immigration Services

Litigation Cases

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Path America & Lobsang Dargey & Path America Sonoco

States

• New York