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EB-5 Program Regulations that Protect the Investor

The EB-5 program provides a path for foreign nationals to obtain a U.S. green card and residency through the capital investment of $900,000. The purpose of the program is to stimulate economic growth and increase job creation. According to the U.S. Citizenship and Immigration Services, the EB-5 program has brought $8.7 billion of foreign capital into the U.S. since 2017. With the rising increase in investments into the program and the corresponding rise in fraudulent activity, EB-5 investors should complete their own due diligence before investing in any EB-5 project.

Since the creation of the EB-5 immigrant investor program by congress, there has been an increased uptake in the number of foreign nationals demanding U.S. visas. The increase in EB-5 investors has unfortunately also increased the number of people looking to defraud potential EB-5 investors. The United States Securities and Exchange Commission (“SEC”) created a whistleblower program for the purpose of curtailing fraudsters from using the EB-5 program for fraudulent activity. Evidently, fraudsters have continued to implement various scams to defraud potential investors and subsequently undermine the quality and reputation of the program. As such, it is more crucial than ever before for potential investors to work with the right EB-5 specialists and advisors who are knowledgeable and aware of all the programs initiated by the SEC in an effort to curb fraud in the industry.

When a potential investor is considering participation in the program and thereby investing in a project in the United States, one of the first steps is that the EB-5 specialist or regional center must provide the potential investor with sufficient project documentation. The potential investor will then be informed about the investment risks, the projected success rate of the project, and other pertinent information they would need to make an informed investment decision. Fraudsters frequently attempt to defraud investors through false promises of high rates of return and claims that the investment is risk-free. It is evident that some of these companies act as Ponzi schemes or other illegal operations which work towards diminishing the reputation of the program and thus the SEC has highlighted common violations arising out of EB-5 schemes:

  • False or misleading EB-5 advertisements is a violation of Section 10(b)-5 of the Securities Exchange Act of 1934.
  • Theft or misuse of investor funds is a violation of Section 17(a) of the Securities Act of 1993.
  • Improper solicitation of investors funds by unregistered broker-dealers is a violation of Section 15(a) of the Securities Exchange Act of 1934.

Due to the prevalence of the EB-5 program, the SEC has further established programs titled investor alerts which warn investors about potential scams in EB-5 offerings. Moreover, under the SEC whistleblower program individuals can receive an award for exposing EB-5 fraud, this provides strong incentive to report any wrongdoing.

EB-5 investors can diminish the risk of fraud through engaging the services of an EB-5 specialist seasoned in the industry. With such experience not only comes the knowledge of which EB-5 projects are not fraudulent schemes but also insight into which EB-5 projects are likely to fail and lead to the loss of the investors’ funds. While one of the requirements of the program is that a foreign national’s investment must be at risk, an investor is still able to reduce such risk through investing in a project which has a higher chance of success. An experienced EB-5 specialist can aid the investor in studying the project documents and also guide them to work with a regional center with an established track record of repaying back the investors’ funds.

Our team of U.S. licensed lawyers have years of experience in helping individuals and families apply for U.S. residency via the EB-5 program. We will assist you throughout the application process, from helping you in choosing the right project to filing your application and receiving your U.S. green card. If you are ready to start your migration journey with The American Legal Center of Dubai, contact us today for more information.

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