USCIS Warns of EB-5 Immigrant Investor Fraud

By David North on October 4, 2013

U.S. Citizenship and Immigration Services has, belatedly, taken a useful step regarding the immigrant investor (EB-5) program.

Together with the Securities and Exchange Commission, the agency this week issued a warning against middle-man fraud in the program.

The "Investor Alert" was, in effect, an admission of something that EB-5 watchers have known for a long time: that there is a lot of promoter fraud in the program. (Unlike so much of immigration fraud, in these cases it is usually the local guys that are fleecing the foreign ones.)

Alien investors were given a detailed checklist of matters to examine before they put half a million dollars — the usual investment amount — into the schemes that can lead to a fistful of green cards for investors and their family members.

They were warned to make sure that everything was in writing, that the brokers were not promising guaranteed returns (EB-5 investments are supposed to be at risk, not loans), and to watch out for "layers of companies run by the same individuals".

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Further, the warning was not simply an alert to the possibility of fraud, it was supported by reports of SEC actions against fraudsters in Chicago who had put together a massive scheme to steal money from Chinese investors, as we reported earlier, and of more recent SEC and FBI moves against a smaller EB-5 scandal, in this case a Ponzi scheme in South Texas, also the subject of an earlier blog.

All good advice, but the government did not go on to say that all EB-5 offerings are, by definition, second-class investments, ones in which offers of a set of visas are being made before money will change hands. The vast majority of investments in America — think of buying some stock on one of the exchanges — are made without such an inducement.

The USCIS document cries out for translation. It is not native English-speakers who are taken in by fraudulent offers in this program, it is primarily Mandarin speakers, as the vast majority of EB-5 investors are from China.